SINGAPORE (Dec 18): Olam International is selling a 50% stake in its wholly-owned subsidiary, Far East Agri, for US$100 million ($135 million) to Mitr Phol Sugar Corporation, Asia’s largest and the world’s fourth largest sugar producer.

Far East operates a sugar refinery in Indonesia, PT Dharmapala Usaha Sukses (PT DUS) in Cilacap, Central Java. Olam will retain a remaining 50% stake in the company.

This comes as part of Olam’s strategic partnership with Mitr Phol for integrated sugar milling and refining in Indonesia, through which both companies will jointly explore the development of a green-field sugar mill in Indonesia.

Under joint venture (JV) agreement, Far East will explore the development of a green-field sugar milling facility in East Java, which will source 1.2 million metric tonnes of cane from farmers upon its completion in 2020.

In addition to the joint venture, Mitr Phol will join Olam’s programme of extending Good Agricultural Practices to farmers across Indonesia, which have been in place since Olam entered the country in 1996.

 “Our potential expansion into sugar milling will transform our overall participation in Indonesia’s sugar industry, which offers attractive investment and return opportunities due to its growing demand and persistent supply deficit,” says Joe Kenny, Managing Director and CEO for Sugar & Dairy, Olam International, on the rationale for the partnership.

“Mitr Phol is a natural partner given our shared vision and complementary strengths. Their strong sugar milling expertise coupled with our farm gate, sourcing and manufacturing capabilities will enable us to cater to the growing demand for sugar in Indonesia,” he adds.

Shares in Olam closed 1 cent lower at $2.16 on Friday.