Yeo Hiap Seng Secures $32 Million Exit Deal

SINGAPORE: In a significant development following the abrupt closure of Oatly's factory in Singapore, Yeo Hiap Seng has announced it will receive a substantial exit compensation of $32 million. This closure, which resulted in the layoff of 59 employees, marks the end of Yeo Hiap Seng's partnership with Oatly that began in 2019.

Exit Agreement Details

The official announcement was made on December 19, revealing that both companies have formally entered into an Exit Agreement after deciding to dissolve their collaboration in producing Oatly beverages in Singapore. The exit compensation will be paid in installments and is expected to be fully settled by January 2027.

Continued Distribution of Oatly Products

Despite the termination of its oat milk production for Oatly, Yeo Hiap Seng will continue to distribute Oatly products throughout Malaysia and Singapore, maintaining a foothold in the oat beverage market. The company reassured its stakeholders that the closure of the Singapore facility is not anticipated to materially affect the net tangible assets per share for Yeo Hiap Seng, emphasizing the strength of its balance sheet amidst these changes.

Oatly's Closure Announcement

Earlier, on December 18, Oatly had announced the closure of its Singapore facility after three years of operation. The Swedish company, a global leader in oat-based drinks, stated that the move was necessary to improve its future cost structure and reduce ongoing capital expenditure.

Impact on Employees

Oatly's factory, which began operations in October 2021, was set up with a significant investment of S$30 million in partnership with Yeo Hiap Seng. Initial reports indicated that the closure would impact 34 employees, but it has since been clarified that an additional 25 employees would also face layoffs, totaling 59 affected individuals as Yeo Hiap Seng reevaluated its workforce needs.

Support for Affected Workers

In terms of employee support, Yeo Hiap Seng has committed to providing severance packages based on the employees' previous salaries and lengths of service. The company has proactively notified the Food and Beverage and Allied Industry Workers’ Union and is working to ensure compliance with Singapore’s tripartite guidelines for workers’ rights during this transition.

Collaboration for Job Opportunities

To assist the impacted workers in finding new job opportunities, Yeo Hiap Seng is collaborating with the Employment and Employability Institute, part of the National Trades Union Congress, offering services such as job matching and career guidance.

Industry Implications

This development raises questions about the future of oat milk production in the region and how other companies may react to changes in the beverage market. The closure of the Oatly facility reflects broader trends in the food and beverage industry, where businesses must continuously adapt to shifting cost structures and consumer demands.