Middle Eastern oil money’s $144m fight for Australia’s Namoi Cotton

The battle for control of Naomi Cotton is heating up after Olam Group, backed by Saudi Arabia’s PIF, raised its offer against the Abu Dhabi-backed Louis Dreyfus.

Saudi Arabia’s sovereign wealth PIF is headed by Crown Prince Mohammed bin Salman. Picture: AFP

Namoi Cotton shareholders are set to benefit from the tussle between two of the world’s largest oil-rich sovereign funds for control of Australia’s biggest cotton ginner.

Olam Group has trumped an already increased takeover offer by global agri-giant Louis Dreyfus Co. It’s the second bid by Olam Group – one of the world’s largest agricultural commodity traders – for Namoi and is 6 per cent above its previous offer.

Olam is offering as much as 70c per share on the condition it receives 90 per cent of the shares.

Namoi’s shares surged 13 per cent during trade on Thursday to 85c as investors bet the $144m bid would not be the final offer.

Singapore-based Olam said its global knowledge of the cotton industry through its operations in Brazil and Africa as well as Australia, gives it the right experience to back Namoi cotton suppliers.

“We have operated as a cotton grower, ginner and as a merchant in Australia since 2007 through our wholly owned subsidiary Queensland Cotton,” said Olam Co-Founder Sunny Verghese in a statement.

“This long experience has allowed us unique insights into the Australian cotton industry, where we have built strong relationships across the supply chain.”

If either takeover offer for Namoi succeeds, it will take out one of the nation’s last remaining publicly traded agricultural companies that is still majority Australian owned, and would effectively place it in the hands of a Middle East oil-rich sovereign wealth fund.

Louis Dreyfus is backed by the Abu Dhabi sovereign wealth fund (ADQ), while Olam Agri, the unit bidding for Namoi, is by the Saudi Arabian Public Investment Fund (PIF).

Under new rules being introduced by the Foreign Investment Review Board, both bidders would require extra checks from the Australian government because they are both state-owned enterprises. However, as both already have operations in Australia they could be considered “frequent flyers” by the government which could speed up the process.

Namoi Cotton operates cotton gins in Australia.

Louis Dreyfus’s most recent offer for Namoi was at 60c per share.

Olam’s offer is at 66c per share conditional on receiving 50.1 per cent of shares, and rises to 70c if the 90 per cent threshold is reached. The company has also reconfigured its bid to be an off-market takeover rather than via a scheme of arrangement that would need a shareholder vote.

Olam’s bid has the support of Samuel Terry Asset Management, which holds 24.2 per cent of the votes for Namoi.

“STAM confirms that it considers the offer to be superior to the proposed takeover offer by Louis Dreyfus. STAM encourages the Namoi Board to engage with Olam in relation to Olam’s offer,” said STAM managing director Fred Woollard in a letter to the Namoi board.

Namoi shares surged 19.19 per cent to 59c during trade on Thursday, equivalent to the scheme of arrangement takeover offer by Olam. The company’s shares are up 74 per cent over five years.

Namoi Cotton chairman Tim Watson advised shareholders not to take any action at this point.

Namoi has advised its first suitor of the rival offer and if it does not proceed with the Louis Dreyfus deal would need to pay a $1m break fee.

Both takeover offers are conditional on FIRB approval and come as a number of agricultural producers have been snapped up by foreigners.

Earlier this year fruit and vegetable company Costa Group was sold for $1.5bn to a consortium led by US private equity group Paine Schwartz.

Beef giant AACo, while still listed in Australia, became majority owned by Bermuda-based billionaire Joe Lewis a year earlier.

The nation’s biggest wheat trader AWB was snapped up by a Cargill-led consortium in 2010, while GrainCorp and Bega Cheese are among the few which remain on the ASX.

Louis Dreyfus is a French company and Olam Group is based in Singapore. However, the Olam Group is itself being broken up and Olam Agri – which is the unit that is bidding for Namoi – is 35.4 per cent owned by Saudi Arabia’s PIF.

The one third chunk of Olam Agri was sold to PIF’s Saudi Agricultural and Livestock Investment Co fund for US$1.24bn in 2022 and is in the process of becoming a separately traded Saudi/ Singapore dual listed company.

Saudi Arabia’s sovereign wealth PIF is headed by Crown Prince Mohammed bin Salman and has $US925bn in assets ranging from football clubs and famous players such as Cristiano Ronaldo, as well as hosting Formula 1 and golf tournaments, owning an airline, and massive investments in renewable energy.