Olam International, the Singapore-based commodity trader, rose to the highest level in almost three years after saying it’s in merger talks with Louis Dreyfus Commodities, the world’s largest rice and cotton trader.

Olam jumped 7.8% to $3.18 as of 11:20 a.m. in Singapore, heading for its highest close since Nov. 12, 2007, after revealing the talks about “a possible business collaboration, which may take the form of, among others, a merger,” the Singapore-based company said today in a statement. A transaction “may or may not proceed,” it said.

 

Joining the two companies would give Olam shareholders a stake in a group with net sales of US$34 billion ($45 billion) in fiscal 2009. Agricultural companies worldwide are seeking acquisitions to benefit from surging demand for food led by China and India.

 

“Their global footprint will be beneficial for both,” said Ben Santoso, an analyst at DBS Group Holdings in Singapore. “They can share their logistics and shipping services and offer their customers better variety of products.”

 

Louis Dreyfus Commodities, a closely held group about 20% owned by its employees, has offices in more than 55 countries, according to its website. It may be worth US$10 billion to US$11 billion, the Financial Times said yesterday, based on estimates of the ratio of its sales to profit and valuation.

 

Olam, which said in June it has $1 billion to spend on acquisitions and investments, had sales of $10.4 billion last fiscal year. The agricultural commodities trader, partly owned by Temasek Holdings, completed six acquisitions worth more than US$700 million in the past year to expand into production and farming to augment its trading activities.