The shareholder takeover battle of national ginning business Namoi Cotton Limited between two international agriculture conglomerates - Olam Agri and Louis Dreyfus Company - continues its slow grind this week, with Olam shares jumping now to 6.02 per cent or 12.3 million shares.
This is against LDC, with the latest reports indicating its shareholding stake in Namoi being at 19.02 per cent - or 39 million shares.
Both entities have also lodged multiple bid extensions as many current shareholders in Namoi have yet to act, likely due to an ongoing ACCC investigation on both takeover offers.
The current final offer by Olam is $0.70 cents per share while LDC is at $0.67 cents per share.
In May, the corporate watchdog released a Statement of Issues outlining preliminary competition concerns with LDC’s takeover, with similar concerns lobbed against Olam a month later.
According to the ACCC, Olam - through its wholly owned subsidiary Queensland Cotton - LDC and Namoi supplies cotton ginning, cotton lint classing, logistics and warehousing services in Australia. Olam, LDC and Namoi also engage in the acquisition and marketing of cotton lint and cottonseed.
The ACCC is concerned that either proposed acquisition would be likely to substantially lessen competition in the supply of cotton ginning services in various parts of Australia.
Speaking on Olam, ACCC commissioner Stephen Ridgeway said its proposed acquisition would reduce the number of competing ginning suppliers in the Lower Namoi Valley from three to two, with Olam operating four of the five cotton gins if the acquisition proceeds.
“Post-acquisition, there would only be one alternative cotton gin in the Lower Namoi Valley region operated by Australian Food and Fibre,” Ridgeway said.
“Olam may be able to significantly reduce competition for cotton ginning services, resulting in higher prices for cotton growers in the Lower Namoi Valley who are unlikely to transport their cotton to gins outside of the Lower Namoi Valley due to transport costs.”
The ACCC is also concerned about the impact on the supply of cotton lint classing services in Australia. Classing occurs at the conclusion of the cotton ginning process when a sample is collected from each bale of cotton lint and sent for grading.
“The acquisition would result in Olam having ownership interests in both ProClass and Australian Classing Services, which together class more than 80 per cent of all cotton lint in Australia,” Ridgeway said.
The ACCC is also concerned that the proposed acquisition would provide Olam with the ability to negatively impact competing cotton merchants from acquiring and marketing cotton lint and cottonseed. This may occur due to Olam’s increased ginning presence in certain cotton regions of Australia, including the Lower Namoi Valley.
“This acquisition may give Olam the ability to tie cotton lint and cottonseed purchasing contracts to cotton ginning contracts, as well as limit competing merchants’ access to cotton lint and cottonseed from Olam’s gins,” Ridgeway said.
“If competing merchants struggle to compete against Olam, the proposed acquisition may result in growers being paid less for their cotton.”
With LDC, the ACCC shared concerns regarding the north of Western Australia and Northern Territory stemming from the emergence of two new cotton gins in Katherine, NT and Kununurra, WA.
Namoi has been contracted to build and operate the Kununurra cotton gin and is a minority shareholder of this gin’s holding company. LDC has entered into a joint venture for the management and operation of the Katherine cotton gin, due to commence operations in mid-2024.
“If this acquisition proceeds, LDC will be involved in operating the only two cotton gins in the north of Western Australia and Northern Territory,” 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.”
As with Olam, the ACCC is also concerned that the proposed acquisition would be likely to substantially lessen competition in the supply of cotton lint classing services in Australia.
“The acquisition would result in LDC having ownership interests in two providers of cotton lint classing services, ProClass and Australian Classing Services, which together class more than 80 per cent of all cotton lint in Australia,” Ridgeway said.
LDC has since responded to the ACCC's concerns, saying it understands the watchdog's important role in protecting and promoting competition in Australia and that it is committed to fully cooperating with the ACCC.
“As a well-established player in the Australian market, with over 110 years of operations in the country and a strong balance sheet, LDC is committed to continued investment in ginning infrastructure to ensure a competitive and thriving industry," the company shared in a statement.
"Equally, Namoi Cotton’s extensive network of cotton gins and well-established industry relationships offer valuable synergies with LDC’s own operations in Australia.
"As such, we are confident that the acquisition of Namoi Cotton by LDC would support the long-term future and growth of the cotton industry in Australia, enhancing our service offering and creating added value for the grower community, wider agricultural sector and other stakeholders.”
The ACCC is also investigating the impact of the proposed acquisition on LDC’s ability and incentive to negatively impact rival merchants’ access to cotton lint, and its ability to limit access to or increase prices for warehousing services for the export of cotton out of the Port of Brisbane.
It is believed the ACCC has yet to publicly release its final report on both takeover offers.