One of the New England’s largest businesses is currently in a bidding war, with Olam Agri outbidding global agribusiness Louis Dreyfus Company in a bid for complete ownership of Australia’s largest cotton ginning company.
Namoi Cotton was a grower-owned cooperative before restructuring to become Namoi Cotton Limited, a fully public company listed on the Australian Stock Exchange, in 2017. It operates ten cotton gins including sits at Boggabri, Wee Waa, Merah North, and Moree, most running 24 hours a day. Last year they ginned 1,173,000 bales of cotton.
In January of this year, Namoi Cotton entered into an agreement with Louis Dreyfus Company, who already own 17% of the company, for the agribusiness to acquire the remaining shares and take into private ownership. Namoi already has two joint arrangements with LDC – a supply chain joint venture (NCA – 51% owned by Namoi Cotton) which stores and exports cotton lint bales and co-products through its warehouse facilities, and a marketing joint arrangement (NCMA – 15% owned by Namoi Cotton) which purchases cotton lint bales from growers through Namoi Cotton’s grower services team for trading into overseas markets.
This agreed scheme would see stakeholders receive 51 cents per share, valuing the company at $105m, and was expected to be implemented mid-year.
Then this week, Olam Agri Holdings, who acquired Queensland Cotton in 2007, made a non-binding offer of 59 cents per share, or $122m. There was also discussion of an off-market take over at 57 cents per share.
“A combination with Olam would bring significant benefits to Namoi including access to Olam’s global expertise, extensive customer franchise and track record of driving growth in its businesses as demonstrated in its Queensland Cotton’s success,” says Olam’s CEO and co-founder Sunny Verghese.
“Acquiring Namoi is in line with Olam’s strategy of strengthening and expanding its cotton merchandising and ginning capabilities in Australia.
“Namoi’s assets, which include gins, grain and cottonseed storage facilities, warehouses and access to rail transport, would be highly complementary to Olam’s existing operations.”
Because Namoi Cotton already had an agreement in place with LDC, the board of Namoi Cotton must go back to LDC and give them their contractual right to match the offer made by Olam. If they decide to go with the Olam bid they may be forced to pay a break fee of $1 million. The company has advised shareholders they do not ned to take any action at this stage while deliberations continued.
However, Namoi’s largest shareholder, Samuel Terry Asset Management, has backed the Olam proposal and made it clear how they will be voting on the matter.
In correspondence to Namoi published to the ASX, STAM, which holds a 22.37% shareholding interest in Namoi, said the Olam offers were “superior proposals to the existing proposal from Louis Dreyfus Company”.
Namoi Cotton [NAM] share price on the ASX surged to 57c on the announcement of the Olam offer, and was trading at 60c a share today, indicating that the market thinks the bids will increase as the two Singaporean based agri giants battle it out.
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