The independent directors at Namoi Cotton Limited have unanimously recommended that its shareholders accept the all-cash takeover offer by global agriculture business Olam Agri for $0.70 per share.
Namoi Cotton Limited manages Australia’s largest network of cotton gins.
It comes a week after the independent directors told shareholders to reject international agriculture business Louis Dreyfus Company’s offer of $0.67 per share. Despite this, LDC’s voting power with Namoi Cotton was bumped up to 18.02 per cent from 16.99 per cent.
Namoi’s directors listed two key reasons for this approval of Olam’s offer, including that it’s three cents higher than the LDC offer. An independent expert has also concluded that the Olam offer is fair and reasonable in its current state.
Each independent director who holds or controls Namoi shares intends to accept the Olam offer.
LDC’s appointed nominee to the Namoi board Sarah Scales will abstain from making a recommendation to shareholders due to the competing LDC Offer and her association with LDC.
This latest update also follows alarm bells raised by the ACCC in its own published statement of issues outlining preliminary competition concerns with LDC’s proposed acquisition of Namoi.
The consumer watchdog raised concerns that the proposed acquisition by LDC would be likely to substantially lessen 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.
The ACCC is also considering whether LDC’s proposed acquisition may substantially lessen competition in the marketing of cotton lint and seed.
“If this acquisition proceeds, LDC will be involved in operating the only two cotton gins in the north of Western Australia and Northern Territory,” ACCC commissioner Stephen Ridgeway said. “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.
“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.”
Meanwhile, Olam Agri owns and operates Queensland Cotton as a subsidiary. The ACCC is also undertaking a review of the Olam takeover, with findings expected to be announced on July 4.