Olam Almonds Australia Pty Ltd, the wholly owned subsidiary of Olam International Limited (“Olam” or “the Company”), has entered into a sale and lease-back agreement for its nearly 12,000 hectares of almond orchards for a cash consideration of A$200.0 million.
The transaction with Adveq Almond Trust, an Australian trust structure owned by a group of investors led by Adveq Real Assets Harvested Resources, LP (“Adveq”), involves the sale and lease-back of almond orchard land and trees as well as related farming and irrigation infrastructure in Victoria, Australia for a period of 18 years, which could be extended or renewed by mutual consent.
Founded in 1997, Adveq is a leading asset manager investing in private equity and real asset funds globally. Currently, its assets under management are approximately US$5.0 billion.
Other key initial members in the blue-chip consortium include Municipal Employee Retirement System (MERS) from Michigan in the US and Danske Capital (“Danske”) from Denmark. MERS is a public non-profit organisation serving municipalities and their employees all across the state of Michigan. Its current assets under management are approximately US$8.0 billion. Danske is an international asset manager and a part of the Danske Bank Group as well as Danica, the local pension authority. Located in Northern and Eastern Europe, it manages in excess of EUR95.0 billion in assets for both the home market retail clients as well as other institutional clients across the world. The Laguna Bay Pastoral Company is also one of the investors and has been appointed as the trust’s asset manager in Australia.
Mr Berry Polmann, Executive Director of Adveq said: “We’re extremely pleased to have the opportunity to purchase Australia’s premier almond orchards from Olam, a leading global agri-business company. We are convinced about the potential of these orchards and look forward to building a working relationship with Olam, centered around sustainable practices.”
Olam’s Executive Director of Finance and Business Development, A. Shekhar said “The transaction is in line with Olam’s strategy to pursue profitable growth and generate positive free cash flow. Though we will no longer own the land, trees or the farming infrastructure, we continue to retain the production economics of the entire almond harvest from these orchards.”
Consequent to the transaction, Olam will receive A$200.0 million cash, and bring down its invested capital and improve return on invested capital. Olam is also expected to book a one-time post tax capital gain of approximately A$45.0 million upon completion of the transaction.
Olam’s Managing Director and Global Head of Edible Nuts, Ashok Krishen said: “We bought these almond assets at competitive valuations a few years ago and have since nurtured the orchards to full health by implementing best-in-class horticultural practices with a high quality on-site farming team. Our actions to extract full value on a sustainable basis are what have enabled us to attract top notch investors who believe in our capability to manage them as a value-adding tenant and farm operator.”
Said Olam Australia’s Executive Director and Country Head, Bob Dall’Alba: “We are committed to the assets for the long term and we will continue to invest in the processing assets, the harvesting infrastructure as well as the Permanent Water Rights. Our interests are fully aligned with the value expectations of the new long-term investors and there will be no change in the way we are going to run the operations.”
Olam will continue to own the 89,084 mega litres of Permanent Water Rights and the 40,000 metric tonne almond processing plant which it built and started running in March 2013.
Subject to customary closing conditions, the transaction is expected to be completed by the first quarter of 2014.