Olam Agri pulls out of the contest for Namoi Cotton race after being trumped by a rival’s high offer

Singapore’s Olam Agri has withdrawn from the race to acquire Australia’s largest ginning business on the back of a big offer from a rival bidder.

A farmer inspects cotton plants in a field on the outskirts of Moree. Picture: Bloomberg

Singapore’s Olam Agri has pulled out of the race to acquire Australia’s largest ginning business Namoi Cotton following a knockout offer from rival bidder Louis Dreyfus Company.

Louis Dreyfus increased its offer price to 77c per share on Tuesday, valuing Namoi at more than $158m, and trumping Olam’s latest 75c bid, which remained subject to Australian Competition & Consumer Commission and Foreign Investment Review Board approvals.

Olam responded with a statement to the Australian Securities Exchange, confirming it would not extend its offer beyond the current close date of October 8, meaning Namoi shareholders who had accepted its proposal would instead retain ownership of their shares after their offer lapsed.

Olam Agri Australia country head Ashish Govil said the company, and its subsidiary Queensland Cotton, would remain an “integral participant” in the Australian cotton industry.

The company retains an 8.24 per cent stake in Namoi.

“We hope that our interest in acquiring Namoi Cotton is seen as a testament to Olam Agri’s willingness to invest in the Australian agriculture industry,” Mr Govil said.

“The proposed acquisition led to a robust and competitive process for Namoi Cotton, allowing the company to realise a full and fair valuation for the benefit of all shareholders.

“We thank the Namoi Cotton board, shareholders and all stakeholders who have been supportive of Olam Agri throughout this period.

“Olam Agri strives to continuously improve the efficiency and commercial viability of Australian cotton growing, ginning and merchandising. We remain committed to the Australian agriculture landscape with further growth plans to transform food, feed and fibre for a more sustainable future.”

Olam and Louis Dreyfus, both major players in the Australian cotton industry, have been locked in a battle for Namoi since January. However by Tuesday, Louis Dreyfus had amassed a 47.66 per cent stake in the company, after securing the backing of major shareholder, Samuel Terry Asset Management, with its latest unconditional bid.

The Dutch agricultural group is seeking a bigger foothold in Australia, the world’s sixth-largest cotton producer. It has been urging shareholders to back its bid on the basis that it had already secured approvals from the ACCC and FIRB.

“Olam’s offer is still conditional, subject to regulatory approvals and subject to receiving acceptances of at least 50 per cent in circumstances where LDC has a relevant interest in 47.66 per cent of Namoi,” Louis Dreyfus said in its fifth supplementary bidder’s statement on Tuesday.

The ACCC was due to hand down its decision on Olam’s buyout proposal on October 31, but had previously flagged concerns that the deal would reduce competition in cotton ginning services in the Lower Namoi Valley in NSW.

Olam Agri and Namoi both provide cotton ginning, cotton lint classing, logistics and warehousing services. Olam Agri and Namoi also engage in the acquisition and marketing of cotton lint and cottonseed.

Louis Dreyfus increased its offer to 68c late on Monday, and advised shareholders that it would lift the price to 77c on the backing of Samuel Terry Asset Management.