State-owned Saudi Agricultural & Livestock Investment Co. (Salic) plans to pursue a full ownership stake in the agribusiness unit of Singapore’s Olam Group, according to people familiar with the matter.
The Public Investment Fund-backed firm intends to start talks as soon as next year to buy the remaining 20% of Olam Agri Holdings it doesn’t already own after closing a deal for a majority holding, one person said, asking not to be identified discussing private information.
Olam Group shares slipped as much as 0.5% in early trading on Wednesday.
Salic, as the firm is known, reached a long-awaited deal with Olam Group earlier this year to double its stake in Olam Agri to 80% for about US$1.8 billion ($2.33 billion). That transaction is expected to clear before year-end after getting regulatory approvals, according to the people familiar with the deal.
That would pave the way for Salic to negotiate a purchase of the remaining stake, the people said. Salic has a call option to buy the rest of Olam Agri within three years as part of the deal agreed with Olam Group in February.
Salic said it reserves the right to pursue that call option within the agreed time frame, while Olam declined to comment.
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Taking over Olam Agri would fit into Saudi Arabia’s food security strategy, which calls for investing in global companies to lock in supply and encourage them to bring production to the kingdom. The country still imports about 80% of what it eats, leaving it exposed to shortages in a time of trade friction, stressed supply chains and contagious animal diseases.
For Olam, it would mark a more slimmed-down company focused on cocoa and coffee, commodities where it ranks as one of the world’s top traders.
The agribusiness unit, which trades bulk grains and makes everything from edible oils to pasta, was created in a rejig of Olam’s structure in 2020. The company had previously pursued initial public offerings for it in both Singapore and Saudi Arabia, but as regulatory bottlenecks delayed those plans, it agreed to sell around a third of the unit to Salic in early 2022.
Salic already owns stakes in Brazilian meat giant Minerva, Canadian grain handler G3 and Indian rice producer LT Foods, among others. Buying all of Olam Agri would give Salic a stronger positioning in the global grains trade, in which it still has limited exposure.
A deal to take over Olam Agri would also underscore that entities in Saudi Arabia are pushing ahead with transactions that drive the kingdom’s economic diversification drive, despite growing fiscal constraints.
