Olam withdraws libel suit against Muddy Waters

SINGAPORE - Olam International has withdrawn its libel suit against Muddy Waters and Carson Block, on the urging of its shareholders in the past few months.

Separately, Temasek Holdings has increased its stake in Olam to 23 per cent.

The agri-commodities trader said yesterday that it had been unsuccessful in serving notice on Mr Block, and had also found through its investigations that both he and Muddy Waters did not have "assets of consequence" against which claims can be made.

"After considering feedback received from several of its shareholders, Olam has decided it should now move forward and focus resources and management attention to deliver value for its continuing shareholders and other stakeholders," the firm said.

Olam had filed the suit against Muddy Waters and Mr Block on Nov 21 last year, after Mr Block criticised its debt levels, the way it booked profits on some of its acquisitions and the valuations of its biological assets at a London conference.

The lawsuit sought unspecified damages, costs and an injunction against republication of Mr Block's comments. A week later, the short-selling research firm published a 133-page report recommending a "strong sell" on Olam.

Despite a vigorous defence - including counter-accusations that Muddy Waters was stirring panic and that Mr Block had visited Olam's office incognito - Olam's share price tumbled to a low of $1.395 at one point.

The stock became the second worst-performing member of the benchmark Straits Times Index last year with a 27 per cent slump.

Since then, Olam has successfully raised US$750 million in a bonds-cum-warrants rights issue, terminated an agreement to buy a Brazilian sugar mill, and last week opened one of the largest almond-processing plants in the world in Australia.

Temasek's support of the rights issue and purchases of Olam's shares to increase its stake from an initial 16.3 per cent also helped to shore up confidence in the trading house.

In the process, the Singapore investment company overtook Olam's founding firm Kewalram Singapore to become its largest shareholder.

Olam's shares on March 20 surpassed the $1.74 level seen before the Muddy Waters episode in intra-day trading, but has since fallen again. The counter on Friday dipped half a cent to close at $1.665, before the announcement was made.

All told, the tide of opinion on Olam seems to be improving. In a research note on Thursday, Standard Chartered said that "recent concerns look overdone".

"Prompted by the completion of the processing plant, our follow-up on-the-ground discussions with operational management for almonds in Australia remind us of Olam's many positive facets that we believe have been forgotten during the recent noise," said analysts Adrian Foulger and Teo Joo Eng.

Noting that Olam's almond orchards are moving towards maturity, free cash flow should shift towards a "material positive", they said.

"This shift to optimal positive cash flow has taken 5-6 years to achieve. Again, this reflects to us a management team that invests for the medium-to-long term, rather than, as some have accused, one that chases the quick buck."

Olam is expected to reveal the results of its strategic review - looking at matters ranging from its gearing level to ways of reducing its vulnerability against future attacks - later this month.

Olam said it had discovered that both Carson Block and Muddy Waters did not have 'assets of consequence' against which claims can be made.

sandrea@sph.com.sg

Get The Business Times for more stories.