Olam: Tata Chemicals will invest US$290 mn for a 25.1% stake in Olam’s Gabon urea mnftg JV. Recall, the project was earlier set up through an 80:20 JV between Olam and the Republic of Gabon (RoG) at an estimated project cost of US$1.3b, with equity contribution of US$450m. Post Tata’s investment, Olam will be diluted down to 62.9%...
This is positive for Olam, as Tata’s involvement reduces implementation risk. Tata will be responsible for project mgt during construction and commissioning, and also operations and maintenance once the plant is complete. Also, the investment by Tata values the project equity at US$1.2b (or 154% premium over book value of investment), which implies that Olam could recognize a gain on investment (est US$366m, or S$0.22/sh)...
No change yet to Street ratings, TP, pending analyst briefing this morning.
Currently Street mostly has Buy ratings with recent TP ranging $3.20 - 4.20.
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