Olam International, the Singapore-based commodity trader - which has secured the takeover of NZ Farming Systems Uruguay - is in merger talks with Louis Dreyfus Commodities, the world's largest rice and cotton trader.
Olam shares jumped 6.8 per cent in Singapore trading on Friday after revealing the talks about "a possible business collaboration, which may take the form of, among others, a merger", the Singapore-based company said yesterday. A transaction "may or may not proceed", it said.
Olam had gained more than 67 per cent of NZFSU shares with its offer to shareholders formally closing on Friday.
Olam, which sought a minimum 50.1 per cent of NZFSU with its 70c per share offer, is expected to inject up to $60 million into the company, and possibly seek a further equity raising from shareholders, estimated at between $35 million and $55 million.
The Louis Dreyfus-Olam merger would result in a group with net sales of US$34 billion in fiscal 2009. Agricultural companies worldwide are seeking acquisitions to benefit from surging demand for food led by China and India.
"Their global footprint will be beneficial for both," said Ben Santoso, an analyst at DBS Group Holdings in Singapore.
"They can share their logistics and shipping services and offer their customers better variety of products."
Louis Dreyfus Commodities, a closely held group about 20 per cent owned by its employees, has offices in more than 55 countries, according to its website. It may be worth US$10 billion to US$11 billion, the Financial Times said yesterday, based on estimates of the ratio of its sales to profit and valuation.
Olam, which said in June it had US$1 billion to spend on acquisitions and investments, had sales of US$7.8 billion last fiscal year. It has made six acquisitions worth more than US$700 million in the past year.