Dutch ag giant Louis Dreyfus Commodities will have to terminate its interest in an NT cotton gin and offload shares in a services firm to acquire Kununurra gin funder Namoi Cotton.
Dutch ag giant Louis Dreyfus Commodities will have to terminate its interest in an NT cotton gin and offload shares in a cotton services firm to acquire Kununurra gin funder Namoi Cotton.
The US$2.5-billion agriculture merchant has this year been locked in a bidding war with Singapore’s Olam Agri Holdings for Namoi Cotton, Australia’s largest cotton company with 10 gins on the books.
Olam’s bid, the higher of the two at present, values Namoi at about $145 million.
The ACCC on Thursday morning said it would not oppose LDC’s offer, so long as it met several court-enforceable undertakings.
Those conditions included LDC agreeing to sell its shares in Proclass, a Queensland-based cotton classing facility, and terminating a joint venture with WANT Cotton, which operates the NT cotton gin.
Without the above moves, the ACCC flagged an unacceptable risk LDC would gain a monopoly over cotton processing in northern Australia as it would hold financial interests in the NT and Kununurra gins and control 80 per cent of the classing services market.
“Without terminating its joint venture with WANT Cotton, the LDC Group would have operated the only two cotton gins in the north of Western Australia and the Northern Territory,” ACCC deputy chair Mick Keogh said.
“Without the divestiture, there was a risk that ProClass and ACS would not compete with each other effectively, given the LDC Group’s respective part ownership and full ownership of these businesses.
“This could have resulted in increased cotton classing prices or a reduction in the quality of classing services in Australia.”
Namoi holds a 17 per cent stake in Kununurra cotton gin owner Kimberley Cotton Company, which is under construction and due to commission in July next year.
That gin is being built to help grow the northern cotton market, which has been a hot opportunity in recent years and has resulted in cropping replacing several of the Ord Valley's failed sandalwood plantations.
Bidding battle
While gaining ACCC blessing was a boon, LDC’s bid still faces headwinds.
At 67 cents, the Dutch firm’s current offer is .3c lower than Olam Agri’s, leading Namoi’s board to recommend approval of the latter’s off-market takeover.
Olam Agri’s bid is yet to pass muster with the ACCC, with the regulator holding concern its bid could lessen cotton gin and lint classing competition in New South Wales.
“Olam Agri reiterates that the Namoi independent directors have unanimously recommended that Namoi shareholders accept the Olam Agri Offer,” Olam said in a statement on Thursday.
“Samuel Terry Asset Management (as trustee for Samuel Terry Absolute Return Group), which is Namoi's largest shareholder holding 25 per cent of Namoi shares, has advised that it intends to accept the Olam Agri offer following the day on which it becomes unconditional… absent a superior proposal and subject to an independent expert concluding (and continuing to conclude) that the offer is fair and reasonable to Namoi shareholders.”
STAM had previously backed LDC’s offer.
Olam currently holds a 6.55 per cent stake in Namoi and has extended the closing date of its offer to August 13.
LDC has a 17 per cent stake in Namoi, which had complicated one of Olam’s conditions of its bid; to acquire a 90 per cent interest in the company.
That condition has now been removed.
LDC launched its first 51c-per-share bid for Namoi in November last year, which was 16 cents above Namoi’s share price at the time.
Olam came into the picture in March with a 59c-per-share offer, only to be trumped by 1c by LDC.
The jostling has continued since then, with Olam in May offering 70c per share one day after LDC lobbed a 67c-per-share bid.
