Singapore-based food and agribusiness group Olam International has launched a renounceable, fully underwritten rights issue, which is expected to raise S$601.7 million (US$447.32 million). Proceeds from the rights issue will be used to partially repay the debt incurred to fund the acquisition of Olde Thompson (OT), a leading US private label spices and seasonings manufacturer. The transaction was completed on May 17 2021 at an enterprise value of US$950 million.

According to Olam, the rights issue proceeds will also strengthen the group’s balance sheet, enhance its credit profile, and provide financial flexibility to capture future growth.

At S$1.25 on a basis of three rights shares for every 20 existing ordinary shares, the rights issue price represents a 26.9% discount to the last traded price per share of S$1.71 on June 21 2021 and a 24.2% discount to the theoretical ex-rights price per share of S$1.65.

Olam co-founder and chief executive officer Sunny Verghese says: “This rights issue, which is fully sub-underwritten by our major shareholder Temasek, provides shareholders who have supported us all these years an opportunity to further participate in Olam’s strategic plan for future growth. Having completed the recent acquisition of [OT], this is a key next step, in line with our reorganization plan, that will bolster our balance sheet and position us well to unlock long-term value for our stakeholders.”

The OT deal builds on two recent acquisitions by Olam Food Ingredients (OFI) in the North American spices sector, namely a US-based chilli pepper business of condiments maker Mizkan America for US$108.5 million and the onion ingredients arm of Cascade Specialties.

Entitled shareholders who choose not to subscribe to the rights issue can also realize value by selling their “nil-paid” rights in the market. They will also be able to subscribe for excess rights shares in addition to their pro rata entitlements.

The rights issue is fully sub-underwritten by Breedens Investments, a wholly-owned subsidiary of Temasek Holdings (Private) Limited, which has agreed to subscribe to any rights shares that are not taken up by other existing shareholders, with no sub-underwriting fees paid. It does not require shareholders’ approval as it is within the share issue mandate approved by shareholders at the group’s annual general meeting on April 23 2021.

Olam has appointed BNP Paribas (Singapore branch), Credit Suisse (Singapore), DBS Bank and The Hongkong and Shanghai Banking Corporation (Singapore branch) as joint issue managers, which together with Mizuho Securities (Singapore) have been appointed as joint underwriters for the rights issue.