Olam

Olam: CEO Sunny Verghese and two directors explain share purchases, rights issue. They said they had no knowledge there was going to be a rights issue. Recall, Olam's independent directors, Michael Lim and Robert Tomlin, had each bought 200k shares on Nov 29 last year, a Thursday while CEO Sunny Verghese had purchased 1m shares the next day. Three days later, the company announced a rights issue, fuelling market talk that they might have run afoul of rules and regulations. In response, mgt explained that it was only on Saturday that the Board decided to call an investment bank, talk to them about bolstering investor confidence, then took a proposal to Temasek later that afternoon. The firm then held a board meeting late on Sunday night to get approval for the transaction. Separately at Olam’s EGM yday, shareholders voted overwhelmingly in favour of the payment of US$6.375 m (0.85 per cent of the principal amount of the bonds) in sub-underwriting fee by the banks managing Olam's rights issue to Temasek Holdings unit Aranda Investments. Olam's underwriting commission to the joint lead managers - Credit Suisse, DBS, HSBC and JPM - amounts to US$15m, or 2% of the principal amount. Shareholders' approval was necessary under listing rules as Aranda and Temasek are both substantial shareholders of Olam, with a current 19%. In response to a question on why the banks are paid more since Temasek is undertaking more risk by absorbing all excess rights not taken up, Olam said it was paying the banks according to market rate. The arrangement agreed on between Temasek and the joint lead arrangers was not for Olam to comment on. He also told shareholders that the firm was looking at ways to make itself less vulnerable to future attacks and will conclude its review in three months. Olam closed 2 cts higher at $1.605 yday. The bonds and warrants will be issued on Jan 29 and start trading on Jan 31.