Mitsubishi Corp, betting on growing demand for food in Asia, agreed to buy a 20 percent stake in Olam International Ltd, the commodity trader controlled by Singapore’s state investment company, in two deals worth S$1.53 billion (US$1.09 billion).
Olam said on Thursday in a statement that it is to issue 332.7 million new shares for S$915 million to Mitsubishi. The Tokyo-based trading house is also acquiring an 8 percent stake in the agriculture firm for about S$611 million from Kewalram Chanrai Group, an Olam spokesperson said.
The Japanese trader is to become the second-largest shareholder in Olam after the deals close with Singapore’s Temasek Holdings Ltd controlling 51 percent.
“We see Mitsubishi as a strategic investor who is well aligned to our long-term growth strategy,” Olam’s executive director of finance and business development Shekhar Anantharaman said.
The price of S$2.75 a share paid by Mitsubishi for the new stock represents a 29 percent premium to last year’s trading average of Olam.
The Singapore company said in a presentation that the price was set “through a competitive bidding process.”
Other bidders were not disclosed.
The Olam-Mitsubishi deal is the latest sign of Asian trading houses spending billions of dollars in agriculture, betting that fast-growing populations in the region will need more food.
While Olam is not a household name, it is a US$3.3 billion firm and supplies materials to companies including PepsiCo Inc and one in eight chocolate bars eaten globally is made from beans handled by the company.
The quantity of rice it handles annually could feed all of Africa for a week.
London’s Rabobank International head of agricultural commodity research Stefan Vogel said Asian companies have pursued a strategy of buying supply chains of food commodities.
“Overall demand will continue to grow and needs to be supplied,” he said by telephone.
Olam’s shares have dropped 26 percent in the past year, more than double the 12 percent slide in Singapore’s benchmark Straits Times Index.
It surged 13 percent before halting its shares on Thursday for the biggest gain since April 2009.
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