Why a French ag giant wants to own Namoi Cotton

Two global giants are locked in a nine-figure battle to acquire Australia’s biggest cotton producer. See the latest.

The future of Australia’s biggest cotton producer hangs in the balance as a French agricultural giant and a Singapore-based merchant compete for the ASX-listed Namoi Cotton.

Earlier this month, the Louis Dreyfus Company’s $138 million bid for the publicly listed cotton company was given the green light by the ACCC, subject to several countermeasures.

A competing $145 million offer from Olam Agri is also in play, subject to an ACCC investigation, where a decision has been delayed, with the watchdog to announce a new proposed decision date.

In Australia for the Cotton Conference, held on the Gold Coast last week, Louis Dreyfus Company’s global head of cotton Joe Nicosia said he was confident its offer for Namoi Cotton would become unconditional, following FIRB approval, in the coming weeks.

“We think our offer is very compelling. It provides shareholders a 89 per cent static increase in price compared to last year,” Mr Nicosia said.

“Australia is known for some of the finest cotton in the world and is a highly desired fibre where demand is still growing.

“Australia is also close to major importers in the Southern Hemisphere, while the growing season is counter-cyclical, which means it is an opportunity to be part of the solution of providing crops throughout the calendar year.

Louis Dreyfus Company’s global head of cotton Joe Nicosia.

“We were pleased to receive the ACCC approval and really excited with our bid out there.

“There is obviously some uncertainty in the approval process for Olam which raises questions for when or if the Olam bid might be accepted.”

Two years ago the Dutch-headquartered LDC expanded its Australian agricultural holdings purchasing Emerald Grain.

Founded by Léopold Louis-Dreyfus in 1851, LDC notably sold a 45 per cent equity stake in the company to Abu Dhabi sovereign wealth fund Abu Dhabi Developmental Holding Company (ADQ).

Namoi Cotton 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).

Meanwhile an Olam Agri spokesperson said its offer remained “superior” with the support of Namoi’s independent directors.

“We believe the combination of Namoi and Queensland Cotton (owned by Olam Agri) would unlock new opportunities for both businesses as well as Australian cotton growers,” the company spokesperson said.

“Olam Agri continues to consider there are good reasons why its proposed acquisition of Namoi will not substantially lessen competition.

“Nonetheless, Olam Agri has also proposed a remedy to address the ACCC’s stated concerns, including offering to divest its interest in a gin in the region of relevance identified by the ACCC, as well as Olam Agri’s interest in ProClass. We remain confident of a positive outcome.”

Saudi Arabia’s Public Investment Fund owns 35 per cent of Olam Agri.