‘Concerns’ raised in bidding war for Namoi Cotton

The ACCC has flagged the potential sale of Australia’s largest cotton gin company to a French giant could “reduce competition”. See the latest.

The nations’ competition regulator has flagged “concerns” with the potential sale of Australia’s largest cotton gin company, currently the subject of a $145 million bidding war.

The ACCC said it has preliminary competition concerns related to giant French agricultural merchant Louis Dreyfus Company’s (LDC) proposed acquisition of Namoi Cotton Ltd.

Earlier this month LDC raised the stakes in the race for Namoi, offering $0.67 a share, 31 per cent higher than its initial offer of $0.51 a share in January this year, following repeated offers from competing Singapore-based agribusiness Olam.

Olam currently holds the highest offer for Namoi at $0.70 a share, lodged on May 8 and endorsed by Samuel Terry Asset Management Pty Ltd, which holds a 25 per cent shareholding interest in Namoi.

The ACCC investigation commenced in February this year, and is now concerned the proposed acquisition would be likely to reduce competition in the supply of cotton ginning services in the north of Western Australia and Northern Territory and the supply of cotton lint classing services.

Of particular concern to the ACCC is two new cotton gins in Katherine, NT and Kununurra, WA, because Namoi is contracted to build and operate the Kununurra cotton gin and is a minority shareholder of this gin’s holding company.

The ACCC has flagged the potential sale of Australia’s largest cotton gin company to French agricultural merchant Louis Dreyfus Company. Picture: Scott Olson/Getty Images/AFP

Meanwhile, LDC has entered into a joint venture for the management and operation of the Katherine cotton gin, due to commence operations in mid-2024.

“If this acquisition proceeds, LDC will be involved in operating the only two cotton gins in the north of Western Australia and Northern Territory. We are concerned it would result in LDC being able to reduce competition between these two cotton gins, which may result in higher prices or reduced service levels for ginning services,” ACCC commissioner Stephen Ridgeway said.

“Growers benefit from competition between cotton gins, and once both are operational, the Katherine gin will be by far the closest competitor to the Kununurra gin.

“The acquisition would result in LDC having ownership interests in two providers of cotton lint classing services, ProClass and Australian Classing Services, which together class more than 80 per cent of all cotton lint in Australia.”

LDC said they will fully cooperate with the ACCC as they complete their assessment.

“As a well-established player in the Australian market, with over 110 years of operations in the country and a strong balance sheet, LDC is committed to continued investment in ginning infrastructure to ensure a competitive and thriving industry,” a spokesperson for Louis Dreyfus Company said.

“As such, we are confident that the acquisition of Namoi Cotton by LDC would support the long-term future and growth of the cotton industry in Australia, enhancing our service offering and creating added value for the grower community, wider agricultural sector and other stakeholders.”

Incorporated in Singapore, but part of the LDC Group, the Australian arm of the company operates three cotton gins located in Emerald and Dalby (Queensland) and Moree (NSW) while supplying cotton warehousing and logistics services with facilities in Dalby and the Port of Brisbane (Queensland) and Moree (NSW).

Namoi operates 10 cotton gins at nine sites across NSW and Queensland. It is also involved in a joint venture with the Wathagar Ginning Company, with a cotton gin located in the Gwydir Valley (NSW).

Namoi has about a 17 per cent interest in the Kimberley Cotton Company, which will operate a cotton gin in Kununurra (WA). This cotton gin’s construction is due to be completed in July 2025.

Submissions in response to the ACCC’s Statement of Issues are invited by May 30, 2024.

The ACCC also commenced reviewing the potential acquisition of Namoi Cotton by Olam Agri Holdings Limited on April 12. Its findings are due to be handed down on July 4.