What’s New
Olam announced this morning that Temasek Holdings is making a cash offer for all outstanding Olam shares at SGD2.23/share. 2016 convertible bond will also be bought back at the same price (SGD2.23/share after CB conversion). This represents a 12% premium over the stock’s last closing price and a 32% premium over the average price of the past three months.
What’s Our View
The offer price values Olam at 15.7x FY14 P/E and 1.4x FY14 P/BV, which we think is very attractive when compared with its peers Noble and Wilmar, which are only trading at around 1x FY14 BVPS.
As Olam has scaled back its capex plan significantly for the next three years, we believe the company is less hungry for capital now. Although management said the current intention is to maintain Olam’s listing status, we believe there is a high chance that Temasek may delist Olam if the
10% free float requirement is not met. Being a private company will give Olam some additional advantages.
We would recommend that shareholders accept the offer in view of the high premium Temasek will pay. Our last call on Olam is HOLD.
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