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The bidding war for Australia’s largest cotton ginner Namoi Cotton (ASX: NAM) has stepped up a notch with a decisive move by Olam Agri Holdings firmly outbidding its Singapore counterpart Louis Dreyfus Company (LDC).
Olam is prepared to pay up to $144.8 million – or 70c per share – to secure control of Namoi Cotton which is almost $21 million higher than LDC’s sweetened cash bid of 60c per share announced on Monday.
The share market alluded to a higher offer on Monday after Namoi’s shares traded well above LDC’s offer after its announcement and remained there throughout the week. Investors this morning pushed Namoi’s share price to a high of 69.5c.
Olam is initially offering 66c per Namoi share but will pay as much as 70c per share should it take control of at least 90 per cent of the company’s stock. The minimum acceptance for the off-market bid is 50.1 per cent.
The bold move comes after major shareholder Samuel Terry Asset Management (STAM), as trustee for Samuel Terry Absolute Return Group, declared on Monday that it would be accepting LDC’s offer. STAM controls 23.3 per cent of Namoi Cotton’s shares.
LDC, a long-term partner of Namoi Cotton, already had a 16.99 per cent stake in the Australian cotton group ahead of launching its takeover play in November last year.
The current share price assumes that LDC – which is also a joint-venture partner with Namoi in the Namoi Cotton Alliance and Namoi Cotton Marketing Alliance - is prepared to accept Olam’s offer. It is the only way Olam can reach the 90 per cent threshold, a point at which compulsory acquisition of the company can proceed.
“Olam has successfully completed its confirmatory due diligence and is pleased to formalise its intention to acquire Namoi’s shares," says Olam co-founder and CEO Sunny Verghese.
“We have operated as a cotton grower, ginner and as merchant in Australia since 2007 through our wholly owned subsidiary Queensland Cotton.
“This long experience has allowed us unique insights into the Australian cotton industry, where we have built strong relationships across the supply chain. This has provided us with a deep understanding of the needs and challenges associated with producing and merchandising high-quality cotton.”
Verghese notes that Olam has a depth of global cotton industry expertise, including operations in Brazil where the company is also a grower and in Africa where it supports a network of 340,000 farmers.
“This international experience and deep local knowledge, coupled with our credentials as one of the world’s largest private cotton ginners, positions us perfectly to support Namoi and foster its future growth,” he says.
Until now, Olam has only offered a non-binding proposal to acquire Namoi Cotton, with the target earlier this week declaring that it would not be proceeding with the previous indicative offer from Olam in light of the increased bid from LDC.
Namoi Cotton has yet to respond Olam’s off-market bid, but STAM has thrown its support behind the offer and has urged the company's board to engage with Olam to progress the deal.
LDC and Olam Agri Holdings are both based in Singapore with LDC's global agricultural merchant and processing interests extending to textiles, bioenergy, plant proteins, animal feed and pet food.
Olam has significant cotton interests in Australia after acquiring Queensland Cotton in 2007, while it also has investments in almond orchards and processing, employing more than 550 people in Australia.
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