Temasek unit offers to buy Singapore's Olam, values firm at $4.3 bln: Reuters

[nutbush]

A unit of Singapore's state investor Temasek Holdings made an offer on Friday to buy all of the shares in commoditytrading firm Olam from its minority shareholders for S$2.23 per share, valuing the company at around S$5.44 billion ($4.3 billion).

Breedens Investments, the Temasek unit, along with Olam's family share holders, members of its executive committee, and Arandda Investments, another Temasek unit, already hold around 52.5 percent of Olam shares.

"Breedens wishes to increase its shareholding to support Olam's strategy and growth plans for the long term," it said in a statement.
The offer price is an 11.8 percent premium over Olam's last traded price.

Olam came under attack from short-seller Muddy Waters in late 2012 for its accounting practices, only to be rescued then by Temasek. A few months later, it set out to cut its capital spending and debt levels

 

[Papsmearer]

Throwing good money after bad. A typical Temasick SOP.

Olam International Ltd.
Muddy Waters, LLC
February 8
, 2013
Q2 Results
–
Still Feeling the Burn
Muddy Waters retains our original investment thesis and Strong Sell rating on Olam’s shares.
Our analysis of Olam’s Q2 2013 results follows.
•
Olam’s main problems worsened in Q2. Its free cash burn was S$169.6
million for the quarter,1 and its borrowings increased 5.6% to S$8,836.4 million. Olam’s gross debt to LTM adjusted EBITDA is now 9.5xcompared to 9.3xat the end of Q1. Olam’s net debt to LTM adjusted EBITDA is now 8.4x, compared to 7.8x at the end of Q1.These numbers are dangerously high.
•
While Olam generated positive operating cash flow in Q2 (for only the 13th time in the 32 quarters it has been public), interest expense was 69.9% of OCF.

With Olam’s bonds yielding approximately 7% to 8% (which we feel is
too low), Olam’s interest burden is not sustainable.
•
On the positive side, Olam management stated that it does not expect its debt to increase in 2H 2013. Hopefully for investors, this prediction will turn out
to be more accurate than Mr. Verghese’s November 29, 2012 statement that Olam would not raise money through the markets for at least five months. It
announced a US$750 million bond financing four days after he spoke
•
Olam’s YOY Q2 sales increase of 24.3% supports our conclusion that Olam’s core trading business is faltering

he

 

[laksaboy]

Temasek is an expert at making 'strategic investments'.

 

[nutbush]

and it's long term investment...

Temasek is an expert at making 'strategic investments'.

 

[Papsmearer]

Short-seller Carson Block’s charge that Olam (OLAM) International Ltd. will fail, his first attack on a Singapore company, is a victory for shareholders after it made the commodity trader more responsive to investors.

“We have listened to our fiercest critics as well as our most ardent advocates,” Olam Chief Executive Officer Sunny Verghese said today at the company’s annual business review, its first since Block questioned Olam’s finances in November.

Olam will slash capital spending by around S$1 billion ($808 million) from fiscal 2014 to 2016 and sell assets to reduce debt, the world’s second-largest rice trader said at the review. The company also dropped its $1 billion earnings target for 2016.

In the five months since Block and his Muddy Waters LLC questioned Olam’s accounts, the commodity trader has raised $712.5 million selling bonds, scrapped a sugar deal and sold almond orchards to boost cash. The company also won increased backing from Temasek Holdings Pte, Singapore’s state investment firm, which now holds 24 percent of Olam, buoying shareholder confidence.

“Short-sellers act as a disciplining mechanism for firms to be more prudent in the way they operate,” Melvyn Teo, director at BNP Paribas Hedge Fund Centre at Singapore Management University, said before the review. “It’s comforting to some investors that Temasek increased its holding of Olam.”

Group Support

Breedens also has an agreement with a group including Kewalram Singapore Ltd., Olam’s founding family shareholder, and 10 Olam executives including Chief Executive Officer Sunny Verghese to not tender their shares until six months after the offer closes, Breedens said in a statement. All totaled they hold 52.5 percent of Olam stock.

Kewalram and three members of key management have agreed to sell a 5.6 percent stake in Olam in acceptance of the offer.

Credit Suisse Group AG, DBS Group Holdings Ltd., and United Overseas Bank Ltd. advised Breedens.

Olam has rallied 30 percent this year in Singapore through to March 12, compared with a 2.2 percent decline in the benchmark Straits Times Index. The stock is set for its seventh weekly increase amid a rise in farm commodity prices. The S&P GSCI Agricultural Index has advanced 14 percent this year, with price surges in coffee and cocoa.
Keep Listing

Breedens doesn’t plan to make any major changes to Olam’s businesses or terminate employees. It also intends to keep Olam as a listed company, unless the minimum float requirements aren’t met, it said. Olam is a supplier and processor of agricultural products and food ingredients across 16 platforms in 65 countries.

“We believe a successful offer will provide Olam with a stronger and more stable shareholder base to support Olam’s strategy and business model for the long term,” Breedens Director David Heng said in the statement.

The offer by the Temasek unit comes after Cofco Corp., China’s largest state-owned food company, agreed last month to buy to 51 percent of Dutch grain trader Nidera BV. In a separate deal, Noble Group Ltd., Asia’s biggest commodity trader by sales, is in talks to potentially form a joint venture around its agriculture unit with Cofco.
Block’s Bet

Block said in November 2012 he was betting against Olam because he questioned the trader’s accounting methods and asset purchases, pushing the stock to a more than three-year low in December 2012. Olam rejected the assertions by Block and his research firm Muddy Waters LLC.

Block today declined to comment.

“Olam has been oversold following the issues raised by Muddy Waters and has bounced back strongly as the company addressed those concerns,” Alan Richardson, a Hong Kong-based money manager at Samsung Asset Management, said by phone before the announcement.

As well as adding Olam shares after the Block allegations, Temasek also backed a $750 million bond sale by the commodity trader. Olam said in December 2012 it planned to sell bonds and warrants to address any “lingering doubts” about its finances. The investment firm agreed at the time to buy any rights not taken up by other investors.

Temasek holds 24.6 percent of Olam through its units Breedens and Aranda Investments Pte, and the founding family has a 20.2 percent stake, according to today’s statement.

 

[nutbush]

dun play play see them no up ok...

Singapore index weakens, but Olam lends support: Reuters

The Singapore index was on course for a third straight session of losses on Friday, but found some support from gains in Olam International after Temasek Holdings said it would buy all minority shares in the commodity trading firm.

Olam shares soared as much as 12 percent to a 22-month high
of S$2.23 -- the price at which a Temasek-led group offered to
buy each share held by minority shareholders.

"For shareholders who have already enjoyed strong gains or
are medium-term shareholders, they can consider taking up the offer," said OCBC analysts in a research note, adding that Olam's share price had risen 40 percent since late January.

The robust gains in Olam helped slow the decline in the benchmark Straits Times Index, which eased 0.4 percent to 3,067.99 points by 0507 GMT, compared with an over 1 percent drop in the MSCI's broadest index of Asia-Pacific shares outside Japan.

The benchmark index looks set to post a 2.2 percent decline this week, its deepest weekly fall in seven.

In other stocks, Golden Agri-Resources Ltd was headed for a 3.3 percent loss this week, its first weekly fall in six.

 

[Papsmearer]

Olam Plunges After Muddy Waters’ Block Questions Accounts
By Jesse Westbrook and Shruti Date Singh November 19, 2012

Olam shares were suspended from trading in Singapore after short-seller Carson Block questioned the company's accounting methods. Source: Olam International Ltd. via Bloomberg

Olam International Ltd. (OLAM), the agricultural commodities trader part-owned by Singapore’s state investment company, plunged the most in four years in U.S. trading after short-seller Carson Block questioned the company’s accounting methods.

The supplier of 20 goods from cocoa to rubber halted its stock in Singapore today, after falling (OLMIF:US) 21 percent in over-the- counter trading in New York yesterday, according to data compiled by Bloomberg. The company is booking profits on transactions before it’s clear how the deals will work out over time, Block said, who also said he’s betting against the stock.

Olam is “dismayed at the nature and lack of substance” of the comments and wasn’t contacted before by him or his Muddy Waters LLC research firm, Chief Executive Officer Sunny Verghese said in an e-mailed statement. He’s waiting for a report from Muddy Waters and “will strongly defend Olam’s excellent reputation for transparency and good governance,” he said.
Video: Olam Drops After Muddy Waters Questions Accounts

Block, 36, has successfully bet against Chinese companies that trade in North America after questioning their accounting methods. One target, tree-plantation operator Sino-Forest Corp., slumped 74 percent before eventually filing for bankruptcy protection in March last year.
‘Leap of Faith’

Singapore-based Olam, which handles more than 90 percent of world trade in peanuts and is one of the top six cotton traders, is “heavily” indebted and aggressive in how it reports what the company calls biological gains on investments, Block told the Ira Sohn Investment Conference in London.

Olam will fail and recoveries for investors will be “negligible,” Block said. “It’s a leap of faith to think the company is being honest with its valuation” gains, he said.

The company, whose second-biggest shareholder is state-owned Temasek Holdings Pte according to data compiled by Bloomberg., dropped 0.9 percent in Singapore yesterday to S$1.74 before the 29 cent plunge to $1.10 in New York. It has fallen 18 percent in Singapore this year compared with a 12 percent gain in the benchmark Straits Times Index. (FSSTI)

“While the accusations are serious, we believe Block’s argument is inconsistent as the group will not fail even if the entire value of its biological assets is written off,” UOB-Kay Hian Holdings Ltd. analyst Eugene Ng said in an e-mailed note. “The stock is likely to see near term impact from this piece of news and could trade lower toward its net asset value of S$1.35 before more clarity emerges.”

Hong Kong- and Mississauga, Ontario-based Sino-Forest plunged before being suspended in August last year after a June 2011 report from Muddy Waters accused it of fraud.
Short Position

Block took a short position in Sino-Forest by borrowing and selling the stock, aiming to profit by repaying the borrowed shares at a lower price. Sino-Forest filed for bankruptcy protection in March. The Ontario Securities Commission accused several executives including the former CEO Allen Chan of involvement in a “complex fraudulent scheme” to inflate assets and revenue.

Other companies targeted by Muddy Waters include New Oriental Education & Technology Group Inc. Block said last month he’s “more convinced than ever” that the Beijing-based company is misleading investors. In February, Muddy Waters issued its fifth report on Focus Media Holding Ltd. (FMCN:US), claiming the Chinese advertising company overstated its network.

Shanghai-based Focus Media’s American depositary receipts (FMCN:US) have gained 24 percent in New York trading this year despite Block’s allegations. The company is now the subject of a $3.5 billion buyout offer by a group of private equity firms including Carlyle Group LP. The deal, if completed, would be China’s largest leveraged buyout.
Proven Correct

“As it pertains to Sino-Forest, he was able to unearth something others weren’t,” said John Goldsmith, deputy head of equities at Montrusco Bolton Investments Inc. in Toronto, who sold his Sino-Forest shares for a loss in June 2011, seven days after Muddy Waters published its report on the company. “He, ultimately, was proven correct. You have to at least listen.”

John Armitage, co-founder of Egerton Capital Ltd., is also shorting Olam, he said at the investment conference in London yesterday.

Olam was founded in 1989 in Nigeria by the Kewalram Chanrai Group as an export company to secure foreign currency, according to Olam’s website. Today, Olam is the fifth-largest publicly traded global wholesaler of agricultural products ranked by revenue, after Bunge Ltd., Archer-Daniels-Midland Co., Noble Group Ltd. and Glencore International Plc., according to data compiled by Bloomberg.

 

[Papsmearer]

Olam International was originally a Nigerian company (yes, you read that right, founded in Nigeria) by Indians. Who than moved the HQ to SIngapore, the country with the least securities regulatory control. U want to invest even $1 in this type of company?

 

[roastgoose]

They buy you sell and you will do very well.