Australia’s Foreign Investments Review Board (FIRB) has reportedly approved Louis Dreyfus Company’s (LDC) takeover bid for Namoi Cotton Limited - Australia’s largest cotton ginning business.
The granting of FIRB approval follows the ACCC’s announcement not to oppose the acquisition of Namoi Cotton by LDC, after accepting a court-enforceable undertaking from the company to divest its shares in ProClass Pty Ltd, and to terminate its joint venture with WANT Cotton Pty Ltd.
Following FIRB’s approval, LDC has waived all other conditions and its offer for Namoi Cotton is now unconditional.
“We have received written approval from FIRB that it has no objections to our offer for Namoi Cotton, which provides shareholders with certainty that our bid can proceed,” LDC managing director for Australia Tony Geitz said.
“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.
“LDC’s proposed transaction would also enable us to enhance our service offering to Australian growers, through a larger ginning and packing footprint.”
On July 30 this year, Namoi’s executive chairman Tim Watson told shareholders to accept the competing takeover offer from Olam Agri of $0.70 per share, which still remains as is, and to reject the LDC offer which was then and still is $0.67 per share. It is unclear whether the board's position has changed in light of recent events.
Commenting on Olam’s offer, Geitz said it has substantial competition issues that he said seem not to be addressed.
The ACCC is still undertaking an investigation into Olam’s takeover offer. In an earlier article, the ACCC noted that both Olam, through its wholly owned subsidiary Queensland Cotton, and Namoi supply cotton ginning, cotton lint classing, logistics and warehousing services in Australia.
Both Olam and Namoi also engage in the acquisition and marketing of cotton lint and cottonseed.
The ACCC said it was concerned that the proposed acquisition would be 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.
In a recent supplementary bidder's statement, Olam confirmed it has proposed a remedy to address the ACCC’s stated concerns, including offering to divest its interest in a gin in the region of relevance identified by the ACCC, as well as Olam Agri’s interest in ProClass.
According to Geitz, Olam’s proposed transaction would give it control of around 40 per cent of ginning operations in Australia, with the scale reportedly unmatched by LDC or any other operator.
As a result, he and LDC believe Olam would have too much market power.
“LDC’s offer, which currently closes on September 13, 2024, is the only offer that has received regulatory approval and is unconditional,” Geitz said. “Shareholders accepting the LDC offer will receive cash payment for their Namoi Cotton shares in 10 business days upon receipt of valid acceptance forms.
“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.”
Olam made its initial takeover offer in April this year, two months after Namoi entered into a scheme implementation agreement (SIA) with LDC to acquire the then-remaining 83 per cent of issued shares in Namoi that it had not currently owned.