The Saudi Agricultural and Livestock Investment Co. (Salic), owned by the kingdom’s Public Investment Fund, already owns about a third of Olam Agri. On Monday, Salic put forward a plan to acquire the whole business. 

First, Salic will acquire 44.57% of Olam Agri for $1.78 billion, bringing its total ownership stake to 80.01%. The Saudi fund will then have three years to exercise a call option on the remaining 19.99%. 

The deal implies an equity valuation of Olam Agri of $4 billion, according to Olam Group. That’s almost 25% higher than Olam’s current market capitalization of $3.25 billion.

Olam shares jumped by over 5% in Monday trading, following the announcement.

What is Olam Group?

Olam, with $3.6 billion in 2023 revenue, is one of the few Southeast Asian companies on the Fortune Global 500, which ranks the world’s largest companies by revenue.

The company created Olam Agri, which sells a range of agricultural products like grains, seeds, edible oils, and rice, as part of a reorganization in 2020. The unit contributed 64.9% of Olam’s revenue in 2023. 

Olam’s two other units are known collectively as “ofi” (formerly Olam Food Ingredients), which focuses on sustainable agriculture and value-added food products like cocoa and coffee, as well as its new ventures business. 

Sunny Verghese, cofounder and CEO of Olam, called the Olam Agri deal “transformative” in a statement. “We can now focus our attention on seeking strategic options to unlock value for the remaining Olam Group businesses and ofi, including the pursuit of an ofi IPO,” he added. 

Olam is expected to raise gross cash proceeds of $2.58 billion from the deal.

Saudi Arabia’s drive for food security

Salic, on Monday, said buying Olam Agri will help it diversify its sources of essential commodities and expand its footprint in the global food sector. 

“This acquisition underscores Salic’s ambition to secure a key position in the global grains sector,” said Salic CEO Sulaiman Al-Rumaih.

Salic’s mandate is to invest in both Saudi and non-Saudi entities to support the country’s food security. 

Besides investing in Olam’s agribusiness unit and its home market of Saudi Arabia, Salic has also invested in companies from Canada, Brazil, Ukraine, India, and Australia.

Saudi Arabia imports as much as 80% of its food, even as it devotes billions of dollars to local production. That’s left the country vulnerable to supply-chain disruptions, like those in 2022 after Russia’s invasion of Ukraine.