Singapore’s Olam makes non-binding offer on Namoi Cotton

The biggest name in Australian cotton is in the midst of an acquisition tussle between two agribusiness giants. See the state of play.

Namoi Cotton's Goondiwindi cotton gin. Picture: Supplied

Singapore-based Olam has made a $122 million takeover offer for Namoi Cotton, entering a race with French giant Louis Dreyfus for Australia’s biggest cotton processor.

In an announcement to the Singapore Exchange on Thursday, Olam revealed that it made a cash offer valuing the cotton giant at 59 cents a share.

The indicative and non-binding offer comprises 58 cents a share in cash and a special dividend of 1 cent per share.

The move trumps the deal struck with Louis Dreyfus to acquire Namoi, when it valued the company at more than $104 million.

In January, the Asian arm of Louis Dreyfus Company signed a binding agreement to acquire the remaining 83 per cent of shares of ASX-listed Namoi after announcing its intention to buy in November last year.

The Namoi share price jumped more than 19 per cent to edge near 60 cents in trading on Thursday, as of 2pm.

Olam subsidiary Olam Agri Holdings has operated Queensland Cotton for the past 17 years. In a letter to Namoi, Olam Agri’s chief executive officer Sunny Verghese argued “combining Namoi and Queensland Cotton will unlock new opportunities for the two businesses and for Australian cotton growers”.

“Acquiring Namoi is in line with Olam’s strategy of strengthening and expanding its cotton merchandising and ginning capabilities in Australia,” he wrote.

“It would enable Olam Agri to enhance its support and world-class service offerings to Australian cotton farmers and communities, leveraging its local market capabilities and global reach to support more sustainable cotton farming.”

Mr Verghese stated Olam intended to continue operating Namoi under the Namoi Cotton brand.

Founded in 1962 and listed on the Australian Securities Exchange in 1998, Namoi Cotton established its first cotton gin at Wee Waa in 1963, near Narrabri.

Namoi Cotton has an annual ginning capacity of 1.6 million bales annually and 10 cotton gins in NSW and southern Queensland, as well as three warehouse facilities with a combined static capacity for half a million bales.

Last year the company returned to profit following three years of drought, delivering an EBITDA of $18.3 million, significantly up on the $2.6 million earnt in the previous financial year.