The ACCC is calling for public submissions regarding a proposed court-enforceable divestiture undertaking offered by Olam Agri Holdings Limited over its proposed acquisition of Australia’s largest ginning business Namoi Cotton Limited (ASX:NAM).
Both Olam and Namoi supply cotton ginning, cotton lint classing, logistics and warehousing services. Olam and Namoi also engage in the acquisition and marketing of cotton lint and cottonseed.
If the acquisition proceeds, and in the absence of the proposed undertaking, Olam would operate four of the five cotton gins in the Lower Namoi Valley. Olam would also have interests in both ProClass Pty Ltd and Australian Classing Services Pty Ltd, which together class more than 80 per cent of all cotton lint in Australia.
On June 20 this year, the ACCC published a Statement of Issues which raised a number of preliminary competition concerns, including that the proposed acquisition by Olam was likely to substantially lessen competition in the supply of cotton ginning services in the Lower Namoi Valley in New South Wales and the supply of cotton lint classing services Australia-wide.
In response to these preliminary competition concerns, Olam has offered a court‑enforceable undertaking that would require Olam to divest its Queensland Cotton gin at Wee Waa in New South Wales and its 20 per cent share of ProClass Pty Ltd.
“In assessing Olam’s proposed undertaking, we will need to be satisfied that it will effectively address our competition concerns in the supply of cotton ginning services in the Lower Namoi Valley in New South Wales and the supply of cotton lint classing services Australia-wide, as well as being structured in a way that is practical and effective,” ACCC chair Gina Cass‑Gottlieb said.
Separate to the proposed divestments, the ACCC is continuing to closely investigate the impact of the proposed acquisition on the increased risk of coordination in cotton lint marketing, cotton warehousing and some regional ginning markets.
The ACCC remains concerned that following the proposed acquisition, there will be multiple linkages between Olam and Louis Dreyfus Company (LDC), another key cotton ginner and merchant.
This includes Olam and LDC’s joint involvement in the Namoi Cotton Alliance and the Namoi Cotton Marketing Alliance, in addition to their common holding in Namoi itself.
The ACCC is concerned that these linkages may increase the likelihood of tacit or explicit coordination and continues to evaluate the risk and potential impact of less vigorous competition between these suppliers post-acquisition.
LDC is also vying to acquire Namoi with a separate takeover offer of $0.67 per share. Olam’s current offer stands at $0.75 per share.
“We are still considering the proposed acquisition, including important coordination concerns which are not addressed by this proposed undertaking,” Cass-Gottlieb said.
“While we have decided to publicly consult on the proposed divestiture, this should not be interpreted to mean that this or any other form of remedy will ultimately be accepted.”
The ACCC invites submissions on the proposed undertaking by October 11, 2024. Further information can be found on the ACCC’s public register.