Global agricultural business Louis Dreyfus Company has bumped up its takeover offer of Australia’s largest ginning business Namoi Cotton Limited by just 1 cent to $0.68 cents per share.
The lift comes after competing international business Olam Agri upped its own takeover offer of Namoi to $0.75 cents per share in response to LDC’s offer going unconditional following approvals from both the ACCC and FIRB.
Olam’s offer is still currently under investigation by the ACCC, with the watchdog recently launching a public submission phase to help buoy its decision.
Olam, LDC and Namoi supply cotton ginning, cotton lint classing, logistics and warehousing services. The three entities also engage in the acquisition and marketing of cotton lint and cottonseed.
LDC and Olam both also own a respective 20 per cent stake each in ProClass Pty Ltd, and Namoi owns 100 per cent of Australian Classing Services (ACS), both of which supply cotton lint classing services, and which together class more than 80 per cent of all cotton lint in Australia.
Both Olam and LDC have agreed to divest their respective interests in ProClass.
Olam has also offered a court‑enforceable undertaking to divest its Queensland Cotton gin at Wee Waa in New South Wales
LDC also has a joint venture with WANT Cotton for the operation and management of a cotton gin near Katherine, Northern Territory, which it also intends to cancel.
If Olam’s offer went ahead without its divestments, Olam would operate four of the five cotton gins in the Lower Namoi Valley according to the ACCC.
As for LDC, it would be involved in operating the only two cotton gins in the north of Western Australia and Northern Territory if its offer proceeded.
The ACCC also considered the impact of the proposed acquisition on the LDC Group’s ability and incentive to restrict rival merchants’ access to cotton lint.
As the proposed undertaking addresses the overlap in cotton ginning services, the ACCC has concluded that the LDC Group would not have sufficient market power to restrict or negatively impact rival merchants’ access to cotton lint.
The ACCC also found that the LDC Group would not be able to limit access to or increase prices for warehousing services for the export of cotton out of the Port of Brisbane.
Rival merchants would still be able to access warehousing services from other competitors, and barriers to entry for rival merchants to establish their own warehousing facilities instead of contracting with a third party are relatively low.
As for Olam’s proposed undertaking, ACCC chair Gina Cass‑Gottlieb said the watchdog would need to be satisfied that Olam will effectively address the ACCC’s 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.”
Separate to the proposed divestments, the ACCC is continuing to closely investigate the impact of Olam’s 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 LDC. 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.
“We are still considering the proposed acquisition [by Olam], 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.”