July 10, 2008
Singapore's Olam buys stake in New Zealand dairy sector
Singapore-based Olam International has announced that it is buying a key stake in a small New Zealand dairy processor to develop a global position in the dairy business.
Olam International said Tuesday (July 8) it would pay US$76 million for a 24.99 percent stake in Dairy Trust Ltd. to expand its source of dairy products.
Sunny Verghese, Olam chief executive, said in a statement that the investment in Dairy Trust was central to the company's strategy of developing a global position in the dairy business.
Dairy Trust bought control of New Zealand dairy producer Open Country Cheese Co. Ltd. in July last year.
Dairy Trust chairman Sam Lewis said cash from the Olam investment would be used to buy up the 47.6 percent of the company it does not yet hold.
Diary Trust also plans investments in a network of four dairy processing plants, the first of which will begin operations in August and the rest in the next two years.
Together with Open Country Cheese it expects to process more than 300 million gallons (1.2 million liters) of milk a year once the facilities are set up.
Dairy Trust's expansion will make it the first new national dairy company since New Zealand's industry restructured seven years ago to create Fonterra, the farmer-owned cooperative that is the world's biggest dairy trader.
Once its plants are running, the company will be operating in the heartland of Fonterra, which already regards Open Country Cheese as a rival for New Zealand's domestic milk supply.
Dairy Trust shareholder approval of the Olam investment will be sought by the first week of September, followed by the formal offer for Open Country shares, Lewis said.
Dairy Trust expects revenues of close to US$301 million and after tax profit of about US$10 million for the financial year to July 2009.
Listed in Singapore and operating in 56 countries, Olam International sources, processes, packs and merchandises commodities ranging from cocoa, rice and cotton to dairy products.
