Global ag giant to acquire Namoi Cotton

A global agricultural giant is set to acquire cotton company Namoi Cotton, which is building Western Australia's first cotton processing gin in Kununurra.

ASX-listed Namoi Cotton told the market it had entered into a scheme of implementation agreement for Louis Dreyfus Company Asia (LDC) to acquire the remaining 83 per cent it doesn’t already own.

Under the deal announced in November, Namoi’s shareholders would receive 51 cents per share in cash, including Namoi paying a dividend of 1 cent per share.

Namoi and LDC have been engaged since 2013, when the pair agreed to a joint venture, and a merger has been on the cards following the former conducting a strategic review in June.  

The takeover deal for Namoi, which has a market cap of $99.32 million, represents a 44 per cent premium to the cotton grower’s last trading price.

Founded in 1962, Namoi operated as a grower-owned cooperative for five decades before listing on the stock market in 2017.

The Toowoomba-headquartered company owns 10 cotton gins across NSW and Queensland.

Namoi is a shareholder in Kimberely Cotton Company (KCC), for which it is set to build and operate WA’s first cotton processing gin in Kununurra, expected to be operational by mid-2025.

KCC secured $34 million loan from the Northern Australia Infrastructure Facility towards the facility, now expected to cost more than $60 million following a cost blowout.

It’s a part of a larger initiative to establish a viable cotton-growing industry in the Kimberely region.

In today's ASX announcement, Namoi assured it would continue progressing the delivery of the facility, under its obligations. 

“Combining Namoi’s ginning business with LDC is designed to create a strengthened and sustainable business for our grower customers and staff and providing Namoi shareholders the opportunity to realise value for their shares at an attractive premium to the share price prior to the announcement of LDC’s indicative offer,” Namoi executive chair Tim Watson said.

“The implementation of the scheme is expected in mid-2024. Until then the Namoi team will be focused on preparing for and delivering, business as usual, for the forthcoming ginning season to our grower customers.

“We will also be progressing the delivery of our obligation to construct and subsequently operate the new gin at Kununurra for the Kimberely Cotton Company.”

LDC also has ties to the top end, after having partnered with WANT Cotton to open the NT’s first cotton gin north of Katherine. 

“Namoi’s network of cotton gins and the business relationships it had built over the past sixty-two years are complementary to LDC’s activities, and we strongly believe the move announced today will add value to both entities,” LDC head of cotton Joe Nicosia said.

“We intend to retain the Namoi Cotton brand name, operate Namoi gins as in the normal course of business and maintain an office in Toowoomba, and look forward to continuing to deliver a competitive service to our grower customers, as we have done over the past 111 years in Australia.”

The deal is subject to shareholder approval and other conditions, and Namoi’s major shareholder, with 21.5 per cent, has indicated its intention to vote in favour of the scheme.