Credit Suisse raises Olam (O32.SG) target price to $4.20 from $4.10 and reiterates its Outperform rating after the company said it will acquire 100% in BFI, a U.K.-based cocoa butter and specialty fats supplier, and BSD, a logistics services provider, for combined GBP33.5 million ($63.9 million). 

“This acquisition is in line with Olam’s cocoa strategy to integrate into mid-stream value-added processing, and should boost its supply chain know-how, given BFI’s strong presence in the specialty fats business and customer access. We also see synergies with its sheanut, edible nuts, palm and dairy operations.”

 

The house notes Olam expects the deal to be value and earnings accretive from the first full year after consolidation, with BFI expected to deliver revenue of GBP150 million, equity IRR of 39% and steady state ROE of 34%. 

 

CS raises FY12, FY13 EPS estimates by 2% to $0.22 and $0.27 respectively. “Olam remains one of the best ways to play the structural agricultural commodity theme, given its strong business model and well-defined growth strategy.” 

 

Shares are +1.0% at $3.07.