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Olam buys US spice group as it weighs food ingredients IPO

https://www.ft.com/content/f98ef068-62aa-422e-9408-b4fc630d4a3f

Olam International has bought US spice company Olde Thompson for almost $1bn as the Singapore-based agricultural trading house looks to list its food ingredient business.

The company announced a split last year into one business focused on food ingredients such as cocoa, coffee, nuts and spices, and another on bulk agricultural commodities such as grains and oilseeds.

A Shekhar, chief executive of Olam Food Ingredients, said it was considering a listing next year to boost growth as it rides a wave of consumer interest in health, taste and sustainability. London, Amsterdam and Zurich are among the exchanges under consideration.

“Europe has three or four options which have the size and liquidity,” Shekhar told the Financial Times. “We think this is a fairly unique business.” OFI is one of the world’s biggest suppliers of cocoa beans, garlic, instant coffee and cashew nuts.

Shekhar said Olam would have completely “carved out” and separated OFI by January and that the demerger would follow “most likely” in the second quarter of 2022. “We are looking at all the major venues,” he said, adding that Olam would seek a main market listing to appeal to a broad range of investors including index tracking funds. To qualify for a premium listing on the London Stock Exchange, for example, companies are required to have a free float of at least 25 per cent.

“In the next couple of months we will be making a final call. We have the main exchanges under evaluation right now,” Shekhar said. “We are having a lot of conversations.”

At the same time as the demerger, OFI will raise capital to “back growth over the next three to five years”, said Shekhar, who joined Olam in 1992 and was previously its chief operating officer.

“We have a plan and this [spice acquisition] highlights the kind of possibilities we have identified, he said. OFI is being advised on the demerger by Credit Suisse and Rothschild.

With a presence across the supply chain from production to trading and manufacturing, OFI is looking to respond to the rising need from retail and food industry customers for sustainable and traceable products.

OFI, which reported S$771m (US$582m) in earnings before interest and tax last year on sales of S$12.5bn, paid $950m including debt for Olde Thompson, the largest private-label spice supplier in the US.

It bought the spice group from Kainos Capital, a midsized private equity group specialising in the food and consumer sectors that has owned the California-based company since 2018, along with the founding family.

Shekhar pointed to growing consumer appetite for herbs and seasonings that enhance taste and flavour in a healthy way, for example dried onions that reduce the need for salt. “That is becoming huge,” he said. “We all want health and wellness but we don’t want it at the cost of taste and flavour.”

Food companies are expecting a rebound in restaurant demand and sustained strength in retail sales. However, there are signs of stress in supply chains as agricultural commodity prices rise and the continued impact of this month’s Suez Canal blockage adds to disruption caused by the pandemic.

Shekhar said container availability issues were unlikely to be resolved before the third quarter of this year.