Olam says share price fails to reflect company’s intrinsic value

It cited the conglomerate discount as a factor.

Olam Group said its share price does not reflect the intrinsic value of its assets in a response to shareholder questions ahead of its 4 July EGM. 

“We do believe the current share price does not fully reflect the intrinsic value comprising the expected proceeds from the Olam Agri stake sale, the ofi business and the Remaining Olam Group assets and businesses,” the group stated.

The company attributed the undervaluation to factors such as the application of a conglomerate discount, limited analyst coverage, and constrained free float, noting that these issues obscure the standalone value of its key operating segments.

To unlock this value and improve return on equity (ROE), Olam outlined its Updated 2025 Reorganisation Plan, which includes using US$2b from the sale to deleverage the Remaining Olam Group, investing US$500m in ofi to support growth and a potential dual listing in Europe and Singapore, and progressively returning capital to shareholders through special dividends from the responsible divestment of its remaining assets.

The company said the sale aligns with its Updated 2025 Reorganisation Plan and is expected to generate capital gains of 64 cents per share.

It said that the US$175m from the sale of its remaining stake in ARISE P&L will contribute to special dividends.

Proceeds from the Olam Agri sale will be received in USD and used to repay USD-denominated debt, so no currency hedging is required. Olam added that CEO Sunny Verghese and CFO N. Muthukumar will step down from executive roles following the transaction, though Verghese will remain on the board as a non-executive director, and both executives will retain their shareholdings.

Addressing questions on why ofi still requires a separate IPO, the company said a standalone listing will improve valuation by eliminating the conglomerate discount and enhancing price discovery.

Olam’s remaining assets include Olam Palm Gabon, Olam Rubber Gabon, Rusmolco, ARISE P&L, the Gabon Fertiliser Project, and digital ventures such as Mindsprint and Jiva, with total invested capital of approximately $2.7b.

The company said further asset-level detail will not be disclosed during the divestment process to protect deal value. Minutes of the EGM will be made available within one month.