Olam launches bid for Namoi Cotton to counter LDC offer

Grain Central, March 21, 2024

SINGAPORE-BASED Olam Agri, has put forward a takeover bid for Namoi Cotton, just months after fellow global agribusiness Louis Dreyfus Company signed a binding agreement to buy Australia’s largest cotton ginner.

LDC originally launched its takeover bid for Namoi Cotton in November.

In a statement released to the ASX today, Namoi Cotton confirmed it had received a non-binding indicative offer from Olam for the acquisition of all its shares.

As part of the bid, Olam Agri has offered Namoi 59 cents per share, including a 1c permitted special dividend, higher than LDC’s offer of 51c.

Alternatively, the company has proposed another structure, under which, Olam would make an off-market takeover bid for Namoi shares for 57.2c per share.

Olam has a long history of operations in the Australian cotton industry through its wholly owned subsidiary, Queensland Cotton, which it acquired in 2007.

In a letter released to the ASX, Olam Agri Group CEO and co-founder Sunny Verghese said the company’s offer “values Namoi at an attractive premium and delivers compelling value for your shareholders”.

“Olam prides itself on its ability to move quickly and efficiently and will devote all necessary resources in order to progress this proposal and negotiate definitive transaction documents,” Mr Verghese said.

“We look forward to engaging collaboratively and to progress this offer in a timely manner, and to ultimately continue our shared commitment to sustaining Australia’s farming future.”

Mr Verghese said the combination of Namoi and Queensland Cotton would “unlock new opportunities for the two businesses and for Australian cotton growers”.

“A combination with Olam would bring significant benefits to Namoi, including access to Olam’s global expertise, extensive customer franchise and track record of driving growth in its businesses as demonstrated in its Queensland Cotton’s success.

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

“Namoi’s assets, which include gins, grain and cottonseed storage facilities, warehouses and access to rail transport, would be highly complementary to Olam’s existing operations.

“It would enable Olam 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.

“Being a cotton farmer ourselves in both Australia and Brazil, we understand and service cotton growers’ requirements better.”

Mr Verghese said Olam would continue to operate the company under the Namoi Cotton brand to leverage its “long-standing reputation”.

LDC agreement implications

Namoi entered into a Scheme Implementation Agreement on January 18 with LDC to acquire the remaining 83 percent of issued shares in Namoi that it does not currently own, by way of a scheme arrangement.

LDC currently owns a 17pc interest in Namoi Cotton and operates two joint ventures with Namoi Cotton: Namoi Cotton Alliance and Namoi Cotton Marketing Alliance.

The implementation of the Scheme of Arrangement was expected in mid-2024.

Namoi said it is “considering the Olam NBIO in context of its exclusivity obligations under the SIA” which includes notification and matching rights to LDC and, if applicable, Namoi “may be required to pay a break fee to LDC”.

“At this stage, Namoi shareholders do not need to take any action,” Namoi said in a statement to the ASX.

“Namoi will continue to keep shareholders and the market informed of developments in accordance with its continuous disclosure obligations.”

Olam is a global, market-leading agribusiness in food, feed and fibre, built over 34 years, and operates in more than 60 countries.

Besides being a cotton grower, it also maintains strong relationships with all growers through the offtake of grains and pulses.

Additionally, Olam Group has extensive presence and investments in almond orchards and processing, employing over 550 people in Australia.

Major shareholder backs Olam

Namoi’s largest shareholder, Samuel Terry Asset Management, has backed the Olam proposal.

In correspondence to Namoi published to the ASX, STAM, which holds a 22.37pc shareholding interest in Namoi, said it deemed the Olam offers “to be superior proposals to the existing proposal from Louis Dreyfus Company”.

“STAM encourages the Naomi Board to engage with Olam in relation to their Proposal,” STAM managing director Fred Woollard said.

He said STAM intends to vote in favour of the proposal when it comes before shareholders, unless a “superior proposal” was put on the table.

Source: Namoi Cotton


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