Olam

Olam: UBS remain sceptical of a competing bid for Olam, and with the stock trading in line with Temasek’s offer price of $2.23/share, house believes funds are better deployed elsewhere, and therefore downgrade Olam from a Neutral to a Sell rating. UBS reckons with the limited share price upside, house do see downside risk if Temasek chooses to walk away from the offer, conditional on holding more than 50% of total diluted issued capital in the company and subject to relevant regulatory approvals. Assuming conversion of convertible notes and options, we estimate total diluted issued capital as 2,721m shares. Given Temasek and consortium members account for around 1,255m shares, acceptances or purchases of only 106m shares are required to clear this hurdle. Currently, the last date for acceptance of the offer is 9 May 2014, subject to an extension by Temasek.