LOUIS Dreyfus Company has received Foreign Investment Review Board approval for its takeover bid of Namoi Cotton, bringing the global agribusiness one step further to gaining control of the largest Australian-owned cotton ginner.

Following FIRB’s approval and the Australian Competition and Consumer Commission’s recent withdrawal of opposition, LDC has waived all other conditions, and its offer for Namoi Cotton is now unconditional.

Competing bidder and owner of Queensland Cotton, Olam Agri, continues to have the backing of  Namoi’s independent directors and largest shareholder, Samuel Terry Asset Management, despite it  awaiting FIRB approvals, and the ACCC opposing the proposed transaction.

LDC’s managing director for Australia Tony Geitz said the announcement provided “shareholders with certainty that our bid can proceed”.

“We are a natural owner for Namoi Cotton, given our long relationship with the company, existing joint ventures, the mutual trust and respect we have built with the Namoi Cotton team and growers, and our strong balance sheet that will facilitate any necessary investment,” Mr Geitz said.

“LDC’s proposed transaction would also enable us to enhance our service offering to Australian growers, through a larger ginning and packing footprint.”

Mr Geitz said the Australian cotton industry would also be beneficiaries of LDC’s takeover of Namoi, despite LDC offering 3 cents per share less than Olam’s superior 70c per share bid.

“Our robust global presence and significant industry expertise in Australia, in relation to ginning operations, quality, supply chain and risk management, will also be a significant advantage if we are successful.

“We plan to continue to leverage our international merchandising expertise to assist growers in maximising the value of their cotton.

“Our global presence provides a comprehensive and holistic view of risk, enhancing growers’ ability to make informed pricing decisions.

“Our collective processing and supply chain assets will allow us to provide better and more timely service to our grower customers.”

Olam awaits findings

On August 1, the ACCC announced it would no longer oppose LDC’s proposal to acquire Namoi.

The ACCC initially opposed the transaction but changed its conclusion after LDC promised to terminate its joint venture interest in the Northern Territory cotton gin and divest its 20-percent stake in cotton-classing service ProClass.

The ACCC released its initial findings into Olam’s proposed acquisition of Namoi on June 20.

The consumer watchdog said the transaction would likely reduce competition in ginning services in the Lower Namoi Valley and lint-classing services.

The ACCC was set to release its final report on August 22 but on August 2 announced this would be delayed as it had requested further information from Olam.

Mr Geitz said Olam was yet to address these competition issues, which would have significant impact on growers and other market participants.

“The proposed transaction from Olam would give it control of around 40pc of ginning operations in Australia, a scale unmatched by LDC or any other operator.

“We believe Olam would have too much market power as a result, to the detriment of growers and the wider industry.”

He said, with the ACCC delaying its final decision, LDC’s offer was the only bid that provided certainty for shareholders.

“LDC’s offer, which currently closes on September 13, is the only offer that has received regulatory approval and is unconditional.

“We encourage fellow Namoi Cotton shareholders to accept the LDC offer promptly.

“Namoi Cotton shareholders face a material downside, if Olam does not receive regulatory approval and the LDC offer has closed.”

No end in sight

On Tuesday, Olam signaled its intentions stay in the contest by extending the closing date for its takeover bid from September 10 to October 8.

According to the the latest ASX notices, Olam currently owns 6.02pc of Namoi shares, while LDC owns a 20.1pc stake.

Other key players are STAM, which owns 24.5pc of shares, and Sydney-based firm Harvest Lane Investment Management, with 6.54pc.

Both Olam and LDC have indicated they would exercise the option to compulsorily acquire all outstanding Namoi shares if either reached the threshold, namely of holding a stake of at least 90pc in the company.

Given LDC has refused to accept the offer of the rival bidder, Olam’s chances of reaching this threshold appears extremely unlikely.

LDC also currently lacks the ability to acquire the 90pc minimal stake as Olam has the backing of STAM.

However, either company could acquire more than 50pc of Namoi shares, potentially enabling it, as the largest shareholder, to exert significant influence over Namoi’s board, constitution, strategic direction, and capital management.

Source: LDC, ASX, ACCC