People & Money

Olam to list ingredients business on the London Stock Exchange

“Olam, founded in Nigeria in 1989, is yet to list on the Nigeria Exchange Group (NGX)”.

Olam International, one of the largest agro-allied companies in the world, has chosen the London Stock Exchange for the initial public offering (IPO) of its food ingredients business. The Olam Food Ingredients business (OFI) is one of the two arms of the Olam group and was created to allow the company focus on meeting changing and growing consumer demand for healthy nutrition and authentic food items.

Olam divided its operations into two last year, with a segment, (OFI) focused on food ingredients such as cocoa, coffee, nuts and spices and another, (Olam Global Agri (OGA)) on bulk agricultural commodities including grains and oilseeds, edible oils, rice and cotton.

The OFI is one of the world’s largest suppliers of cocoa beans, onions, garlic, coffee and almonds. It has about 15,000 employees, partners with more than 2.6mn farmers worldwide and owns more than 100 manufacturing plants. In H1’21, the segment reported earnings before interest of USD316m (compared to USD233m in the prior period), indicating a 35.6% y/y growth.

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The company aims to pursue a premium listing on the London Stock Exchange (LSE) and a secondary listing on the Singapore Exchange (SGX). It expects to raise approximately USD2.8bn from the IPO and could be listed on the FTSE100 given the valuation of other listed comparable food ingredients companies.

Olam’s choice of the LSE for its IPO is a positive development for the bourse, as well as  a vote of confidence in the UK food sector. Over the last three decades, the New York Stock Exchange (NYSE) has grown to be the biggest bourse in the world, and consequently attracted more new listing than the LSE.

Add to this, the NYSE has delivered more returns to shareholders than the LSE. Other factors that make the NYSE more attractive are its lower fees, increased opportunities for diversification, lower rebalancing costs, and higher liquidity.

Olam, founded in Nigeria in 1989, is yet to list on the Nigeria Exchange Group (NGX). The reasons are not farfetched. As an objective for listing, companies only want to list in markets that offer the maximum possible capital on public offering, and the Nigerian local bourse fails this condition.

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This is because Nigeria is currently characterised by a severe case of weak economic growth, low consumer purchasing power and poor liquidity of the local bourse. Therefore, IPOs on the NGX will not deliver optimum returns to companies. This explains why Interswitch is yet to list on the NGX, and why MTN Nigeria opted for a listing by introduction (over an IPO) when the Nigerian government compelled the company to list.

Olam has disclosed that it would list the other business unit (Olam Global Agri) in another six to twelve months after OFI starts trading in London.

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