OLAM (Lim&Tan)

Olam has confirmed it is raising S$731.78 mln net of expenses (of which 50% will be used for acquisitions) via:

- Placement of 94.408 mln shares to institutional investors at $2.60 each to raise $245.46 mln gross (6x subscribed by >100 institutional and other investors).

- Preferential offering of 97,292,,951 shares to existing shareholders on a 1-for-22 basis at $2.56 each to raise $249.07 mln. Kewalram Singapore, Temasek and George Varghese have undertaken to subscribe in full for their combined 39.84% entitlement.

- Subscription by Temasek for 94.408 mln shares at $2.60 each, to raise $245.46 mln. Temasek will raise its stake from 12.95% before the exercise to 15.8% after.

- Olam’s issued capital will increase by 286,108,951 shares to 2,426,553,869 shares.

- Like other players in the commodities arena, additional and sizeable capital has become, in recent times, even more essential, to fund acquisitions and other capital expenditures, which tend to run into hundreds and hundreds of million dollars. Glencore for instance raised almost US$10 bln in its recent IPO.

- Olam too has been making acquisitions in recent years, which have helped boost the bottom-line. Indeed, management said they have “significantly exceeded expectations” on their 6-year strategic plan that was put in place in 2009.

- We would reinstate BUY, especially after the recent weakness (in tandem with the overall sector) and now that equity funding is “out of the way”, and which had also contributed to the recent weakness. (Our last call, a technical one was made last September, at the time of merger talks between Olam and Louis Dreyfus. The stock’s closing high in Nov ‘10 was $3.38, 2 cents short of our target.)