Louis Dreyfus, Olam in merger talks: report

French firm Louis Dreyfus is in merger talks with Singapore-listed Olam International, a proposed amalgamation that will create the world's third- largest agricultural trader, says a media report.

"Louis Dreyfus, the French family-owned commodity trader, is in merger talks with Singapore-listed rival Olam International," the 'Financial Times' said.

The combination of the two companies would create a company with an estimated market value of $15 billion and it would be the biggest trader in commodities.

"If the merger goes ahead, it would create the world’s third largest trader after Cargill and Archer Daniels Midland," the daily said.

Quoting Olam, FT said, the discussions were "still preliminary" and cautioned that the talks could collapse without a deal.

Olam today said the two companies were discussing "a possible business collaboration which may take the form of, among others, a merger".

Louis Dreyfus is considering a radical change of ownership and is also exploring various options, including an initial public offering or the sale of a stake to long-term investors.

However, quoting people close to the company, FT said "the talks are at a very early stage and the family members may ultimately decide against a sale."

In the past, Louis Dreyfus has been able to fund its expansion through loans and its free cash flow, such as the rapid growth during the 1970s and 1980s.

But this merger comes as asset valuations are much higher across the industry and other traders believe that the company would be unable to grow as much as it wants to without finding a new source of capital.