Dutch agriculture giant Louis Dreyfus Company have today received Foreign Investment Review Board approval for its takeover bid for Namoi Cotton.
Dutch agriculture giant Louis Dreyfus Company have today received Foreign Investment Review Board approval for its takeover bid for Namoi Cotton.
It followed the August decision of the ACCC to not oppose the takeover, so long as several conditions were met prior to the deal.
Those conditions included that the $2.5-billion agriculture merchant terminated its joint venture with WANT Cotton, which operates a gin in the Northern Territory, and selling its shares in Proclass, a Queensland-based cotton classing facility.
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.
LDC has since fulfilled the ACCC conditions, and today revealed it had received approval from FIRB.
Subsequently, LDC waived all other conditions and made its offer for Namoi Cotton unconditional, at a price of 67 cents per share – an 89 per cent premium to Namoi’s undisturbed share price.
LDC managing director Australia Tony Geitz said the news neither the ACCC nor FIRB would oppose the takeover gave certainty to shareholders.
“We are a natural owner for Namoi Cotton, given our long relationship with the company, existing joint ventures, the mutual trust and respect we have built with the Namoi Cotton team and growers, and our strong balance sheet that will facilitate any necessary investment,” he said.
“LDC’s proposed transaction would also enable us to enhance our service offering to Australian growers, through a larger ginning and packing footprint.
“Our robust global presence and significant industry expertise in Australia, in relation to ginning operations, quality, supply chain and risk management, will also be a significant advantage if we are successful.”
LDC is not the only company bidding to takeover Namoi, with Singapore’s Olam Agri Holdings also seeking Australia’s largest cotton company.
Olam’s bid of 70 cents per share is the higher of the two, and values Namoi at about $145 million.
But Olam is yet to receive ACCC approval, among other hurdles, with regulators concerned its bid could lessen cotton gin and lint classing competition in New South Wales.
Olam currently holds a 6.55 per cent stake in Namoi, while LDC holds a 17 per cent stake.
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.
Mr Geitz said the competing offer had substantial competition issues and as a result there was no certainty the offer would come to fruition.
“The proposed transaction from Olam would give it control of around 40 per cent of ginning operations in Australia - a scale unmatched by LDC or any other operator,” he said.
“We believe Olam would have too much market power as a result, to the detriment of growers and the wider industry.
“LDC’s offer, which currently closes on September 13 is the only offer that has received regulatory approval and is unconditional. Namoi Cotton shareholders face a material downside, if Olam does not receive regulatory approval and the LDC offer has closed.”
The Olam Agri offer was yesterday extended to October 8.
Namoi shares were up 2 per cent to 70 cents per share after the announcement.
