Mitsubishi Corp. to Take Strategic Stake in Olam International
As growth slows in Japan, cash-rich Japanese companies are looking to outside markets for investment opportunities. Toward this end, Japanese conglomerate, Mitsubishi Corp. has announced it will take a strategic stake in Singapore-listed commodities trader, Olam International Ltd. in a deal worth US$1.1 billion.
Under the terms of the subscription agreement, Olam will issue 332.73 million new shares, or 12% of the enlarged capital to Mitsubishi for $2.75 per share, representing a 44% premium for the ending share price prior to halting trading on the Singapore Exchange on August 27.
In a separate transaction, Mitsubishi will buy an additional 8% stake in Olam from the founding member of the Kewalram Chanrai Group. After the subscription agreement is completed, this will bring Mitsubishi’s total stake to 20%, making it Olam’s second largest shareholder after state-investment firm, Temasek Holding Pte Ltd., which will then hold 51.4%.
“We see Mitsubishi as a strategic investor who is well aligned to our long-term growth strategy. This transaction will allow us to pursue selective value accretive investment opportunities that are presented by the current macroeconomic uncertainty and depressed commodity market conditions,” A. Shekhar, Olam’s executive director of finance and business development said in a statement according to The Wall Street Journal.
This move by Mitsubishi is one in a string of deals by Japanese companies looking to acquire assets and establish a presence in promising South East Asian markets. Last week, Japan’s Kirin Holdings announced it was buying a 55% stake in Myanmar Brewery Ltd for US$560 million, and in February, Japan’s state-owned postal service announced it was buying Australian logistics company, Toll Holdings Ltd for US$5.07 billion as a vehicle through which to gain a foothold in Asian-Pacific markets.
Mitsubishi’s buy-in certainly gives Olam a boost in confidence after it was sought after by a short seller in 2012, and Muddy Waters predicted that the company would fail, only to see a reprieve when Temasek and its partners stepped in and bought 80.4% of the company while keeping it listed on the Singapore exchange.
In addition to Mitsubishi’s strategic stake purchase, the two companies have also agreed to establish a joint venture in Japan to that would combine Olam’s raw material origination platforms with Mitsubishi’s downstream capabilities to create a value chain through which select Olam products can be distributed through Mitsubishi’s extensive distribution and retail networks.