3/18/2014

Olam – Is it a bail out using public fund?

The acquisition of Olam by Temasek is raising eyebrows and frowns from many quarters. Kenneth Jeyaratnam has commented negatively on it. Below is Christopher Balding’s article on the buy out of Olam. Temasek seems to be very bullish in this commodity trading company. It came out in full support when it was shorted down by Muddy Waters a year ago. Now it is making an offer with the possibility to buying over the company at a high price of $2.23 when it could have had the company for a song when it was under attack. Why? Why buy at such a huge premium and not when it was about 90c? Another case of buying high? OPM?
 

Why is Temasek supporting a foreign owned company to want to commit $2b on it when it could buy it for less than half the present price? Another long term strategy stuff?
 

‘Just had to write about this interesting little tidbit I saw today about Temasek and Olam. According to news reports, Temasek through a subsidiary is going to buy Olam at a 12% premium to the current share price. This is an interesting development and to me raises a couple of questions. First, I am intrigued that Temasek is paying a 12% premium after the stock has already increased 30% since the first of the year.
 

This means that Temasek is either paying nearly a 45% premium to what it could have paid just two months ago and is really slow to spot a value in its own portfolio or insiders were buying the stock in advance of a buy out offer they knew was coming. This 30% increase is even more abnormal considering the Straits Times (Index) is essentially flat for the year. Neither scenario is particularly attractive.
 

Second, this seems like a very oddly timed buy out. Prior to the first of the year, Olam had traded primarily in the $1.50-1.75 SGD range and this follows on the announcement that profit declined 13%. If Temasek felt this strongly about Olam and its long term business prospects, it would seem to be a better proposition to buy at the bottom of the market because you know the business well and believe the market is undervaluing the business. Not wait until there is a 30% increase in two months and then offer a 12% premium. The general philosophy of long term investors is buy low and sell high. I am just a professor though, so what do I know.’

Christopher Balding

22 comments:

Anonymous said...

It's amazing what a fistful of dollars do to your ego.

Anonymous said...

Nothing strange about it; it's consistent with Temasek's strategy of buy high, sell low. Think Shincorp, ABC, Bank of America.

No pain involved as it's OPM; oh, wait a minute, it's OUR money.

Ouch.

Anonymous said...

Olam is a global leader in the supply chain management of agricultural products.

For Sinkieland with no land for agriculture, I think this Temasek decision is very strategic one, to supply Sinkies with enough food for 6.9 million, if need be.

If there is a company which can supply or make lots of fresh water, I think Temasek will also for sure invest in it. In fact, I think Hyflux is one.

Anonymous said...

The CPF minimum sum need to increase to $300,000. The draw out date need to defer to 70 years old. Huat ah.

Veritas said...

The only reason I can think off this fucking stupid deal is Ho Ching got fuck by Olam CEO and she is now bailing out her cum pumper.

Olam is a fucking caste-ist/racist company, hell bent to impose caste system here and make us Dalits. The Olam top fucking managers are as below.

Sridhar Krishnan
Ashok Krishen
Venkatramani Srivathsan
Jagdish Parihar
Ranveer Chauhan
Sunny Verghese
Ashok Hegde
Gerard Manley
A. Shekhar
Vivek Verma

Other than one white man, all FT Indians. All her low rank underlings also FT Indians. Olam failed because she support caste system, hiring IQ82 Indians and not welcoming Singaporeans, the highest IQ people into the company.

Olam is such fucking company that her destruction should be celebrated by Lion dance. Unfortunately, seems that PAP would not let such a HQ of caste system evangelism fail.

Singaporeans, the smartest, kindest and most gentle people are made to bail out Olam, who are loaded with toxic financial instruments.

Anonymous said...

Taking olam private is quite obvious.

Veritas said...
This comment has been removed by the author.
Anonymous said...

No lah, it just happen that Olam has a lot of Indians as top managers.

Even if Olam has Eskimos as top managers, I am sure Temasek will also invest for what Olam is, not because of the race of their top managers.

Sinkies even had an Indian Sinkie as President, and there are also 4 Indian Sinkie ministers.

oldhorse42 said...

I kick myself for selling out early. Perhaps to some one who had insider knowledge that this counter would fly soon.
Luckily still keep some olam bond, Pay 6.75% in US$

Anonymous said...

Tiok. Doesn't matter black, brown yellow or white cat, as long as they catch mice, it is a good cat.

Anonymous said...

Why not Temasek be more transparent.
Tell us what is their investment criteria for making "BUY" decision.

QUESTION
----------
How many Sinkies believe we will only find out when Pigs fly ... out of Singapore? ... kee chiu

Matilah_Singapura said...

Business is about money and experience: those with the experience, get the money; and those with the money get The Experience!

Nigerian scam. This one, damn good. Free money from world's richest suckers.

Most companies -- share price down. This one, at record high. So, steady-lah, our hero Temasek, buy buy buy!

These fuckers are insane.

Chua Chin Leng aka redbean said...

Hi Veritas, welcome back. Just a friendly reminder that the anti harassment bill has been passed. So please hold back your horses when you get personal.

Bloggers do not have a facility to amend comments other than deleting and reposting. Otherwise I would take liberty to amend a few of the words you used in your comments in 1:23pm

Take it easy mate.

Anonymous said...

Temasek, welcome to the dark side.

Anonymous said...

Redbean,
in case the daft did not know , the very likely reason that TH has to bail Olam is because it is to prevent Olam from further investigation if it is collapsed. The investigation is most likely akin to something like the $2 scam company in AIM. First of all, there is issue of creative accounting in OLam discovered by Muddy, and surely there is mastermind of who actually instigated the creative accounting ( isn't that obvious who is the culprit ?) and this will be officially known once olam collapsed , hence to cover all tracks , TH will just bail out olam. Isn't you see how this PAP works ? Isn't that that how our national asset endup been PAP's asset ?

People don't just act blur and pretend not to know.

Chua Chin Leng aka redbean said...

No lah, cannot make such wild allegations. Olam is managed by the best foreign talents Sin City can find. How to go wrong?

Anonymous said...

Did TH gave a good reason on the offer. If yes then fine. If no, they why

b said...

Cronyism : the unfair practice by a powerful person (such as a politician) of giving jobs and other favors to friends.

Most likely, all other indirect tax will increase further in near future to cover this purchase . All these screw ups are too spur sinkies to move on to greener pastures where housing and cars are affordable. Why settle for costly 99lhflats and crowded public transport when sinkies can have it better?

Anonymous said...

"No lah, cannot make such wild allegations. "

When the party accused and smear the oppositiion party with wild allegation, did we see the holy party men say anything about wild allegation ? No ? so surely they must be doing something right.

We just following their footstep of moral value and example. is there anything wrong with that ? they pay themselves millions so to say they are uncorrupted, so they are idol to follow, and we just follow their way of making statement the way they make. Don't blame us , blame the idol because they set the "good" example.

Anonymous said...

One comment above listed the senior mgmt is interesting. Is this common in listed companies?

Anonymous said...

If they smear people, report to Willaim Wan, Chairman of Kindness Movement and let him take it up with them lah.

Anonymous said...

'One comment above listed the senior mgmt is interesting. Is this common in listed companies?'

Not now but some time in the future many local companies will be like that.