SINGAPORE: Olam buys Egypt's Dehydro Foods
- Buys Egyptian ingredients firm
- Continues 2012 acquisition spree
- Deal comes amid claims over finances
Investment firm Muddy Waters has questioned Olam's finances
Singapore agribusiness giant Olam International has acquired Egypt-based onion and herb business Dehydro Foods.
Olam said Dehydro is Egypt's largest exporter of dehydrated onions and would add to its B2B ingredients business.
"This transaction is part of Olam's strategic thrust to become the leading supply chain partner to its major global customers as the large food companies increasingly outsource their raw material and ingredient supply chain to reliable third-party suppliers who have a global sourcing and processing network," Olam said.
The company, which paid US$30.8m for the business, also said Egypt's trade deals with the EU gave it an advantage to other exporters of dehydrated vegetables. Egypt can also process onions "at more competitive costs", Olam said.
Greg Estep, head of Olam's spices and vegetable ingredients business, said Dehydro had potential for growth in Europe and further afield.
"Dehydro produces high quality dehydrates and its plants are accredited with key customers so we believe they have a strong franchise and a very strong potential for growth in exports into the Middle East, Europe, Brazil and Japan. It fits very well with our overall spices portfolio where we have a global market leading position," he said.
This year, Olam has acquired a sugar refining business in Brazil and signed two ventures with US companies - with cocoa group Blommer Chocolate Co. and with agribusiness Lansing Trade Group on grains and oilseeds.
However, Olam has faced accusations its finances are in trouble. Investment firm Muddy Waters has said Olam is in continued "deluded denial" of its fiscal problems and has offered to pay for the firm to get its debt rated by Standard & Poor's.
Olam has said Muddy Waters' claims are "false and misleading".
OLAM INTERNATIONAL ACQUIRES 100% STAKE IN DEHYDRO FOODS IN EGYPT FOR US$30.8M
Singapore, November 30, 2012 –
Olam International Limited (“Olam”), a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, announced today that it has acquired 100% equity interest in Dehydro Foods Limited (“Dehydro”), a leading processor of dehydrated onions and herbs in Egypt, for US$30.8 million including an estimated amount of US$3.5 million for net working capital. The consideration was arrived on a negotiated basis taking into the account the historical performance and the prospects of the business. The consideration shall be discharged on a cash basis from internal accruals and shall be paid at completion.
Established in 2000, Dehydro is today the largest exporter of dehydrated onions from Egypt. Dehydrated onions account for about 85% of its annual revenues with the balance 15% from processed herbs and specialty vegetable oils.
Dehydro operates two facilities located just outside Cairo with current annual capacity of 8,500 metric tonnes in dehydrated onions and 2,300 metric tonnes in herbs in finished form.
Investment Rationale and Strategic Fit
This transaction is part of Olam’s strategic thrust to become the leading supply chain partner to its major global customers as the large food companies increasingly outsource their raw material and ingredient supply chain to reliable third party suppliers who have a global sourcing and processing network.
In addition to the US and China being the key origins for dehydrated vegetables, Olam has identified new origins including Egypt as potential growth areas. Egypt enjoys close proximity to the Middle East and Europe and preferential duty access for imports into the EU. The country also produces high quality onions which are processed at more competitive costs relative to other origins.
The acquisition of the largest exporter of dehydrated onions in Egypt further consolidates Olam’s global leadership position in the Spices & Vegetable Ingredients space. Dehydro will add to Olam’s configuration of assets and product lines from earlier acquisitions in spices and dehydrated vegetables in the US, China and India to bring about further synergies in sourcing, value-added processing and distribution.
Olam’s President and Global Head of Spices & Vegetable Ingredients, Greg Estep said: “Dehydro produces high quality dehydrates and its plants are accredited with key customers so we believe they have a strong franchise and a very strong potential for growth in exports into the Middle East, Europe, Brazil and Japan. It fits very well with our overall spices portfolio where we have a global market leading position.”
The investment is expected to be immediately earnings accretive to Olam.
Olam expects growth to come from sales through its existing customer network, in addition to sales growth from Dehydro’s customers in the Middle East and Europe.
Overall, the investment is expected to deliver 28% in EBITDA margin and 45% in Equity IRR at steady-state.
Original source: Olam International
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