Olam subsidiary sells dairy farm land

New Zealand Farming Systems Uruguay (“NZFSU”), a wholly owned subsidiary of agribusiness company, Olam International Limited, has sold dairy farm land in the Western and the Eastern regions in Uruguay for a total cash consideration of US$53.7 million. NZFSU owns dairy farms in the Western, Eastern and Central regions in Uruguay on 28,478 hectares of farm land.

Some 1,769 hectares of farm land in the West of Uruguay will be bought by Uruguay-based farming company, Nalmer Sociedad Anonima.  NZFSU plans to consolidate the current farming assets and livestock in the West with its farms in the Eastern and Central regions and will lease the farm land being sold for the next two years in order to complete the transition.

In another transaction, NZFSU has also sold 6,002 hectares of dairy farm land located in the East of Uruguay to Galperin Group, an agri-business group in Uruguay. This dairy farm land will have a long-term lease agreement for a period of 12 years, which is renewable upon mutual consent.

“The transactions are aligned with Olam’s strategy to pursue profitable growth and generate positive free cash flow,” explained Olam managing director and Global Head of Dairy, Vivek Verma. “Not only do we free up cash for redeployment into other more value-accretive projects, we also retain the upstream dairy farming economics, which remain fundamentally and structurally attractive in the long-term due to increasing demand and supply constraints.”

Besides a gross cash proceeds of $53.7 million,  Olam will book a one-time pre-tax gain of about $18.0 million upon completion of these transactions in the fourth quarter of FY2014.