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A battle for control of Namoi Cotton (ASX: NAM) has emerged with an offer from a another major Singapore agribusiness, the second in the past four months, upping the ante for the Australian cotton processor by 16 per cent to $122 million.
Singapore-based agribusiness Olam Agri Holdings has made a decisive move to snare the cotton business after fellow Singapore agricultural group Louis Dreyfus Company Asia (PDC) signalled a $105 million takeover offer in November that became official this year.
PDC already held 17 per cent of Namoi shares prior to announcing its ambitions to take full control of the Toowoomba-based company, which is the country’s largest Australian-owned and operated cotton processing group.
Namoi Cotton today reveals that Olam forwarded its offer to the board after the market closed yesterday afternoon with the bid priced pitched at 59c per share, up from the 51c bid lobbed by PDC late last year.
The offer price includes a special dividend of 1c per share to be paid by Namoi as part of the total cash consideration.
Major shareholder Samuel Terry Asset Management, which has a 22.37 per cent stake in Namoi Cotton, has already voiced its support of the Olam bid and is likely to accept a binding offer if it is forthcoming and in the absence of a better offer being made.
However, the bid by Olam has to navigate the terms of its exclusivity obligations via a scheme implementation deed signed by Namoi with LDC in January. This includes a potential break fee payable to LDC.
Olam already has significant cotton interests in Australia after acquiring Queensland Cotton in 2007. It also has investments in almond orchards and processing, employing more than 550 people in Australia.
The Singaporean rival to LDC says that by combining Namoi Cotton and Queensland Cotton, the operations will “unlock new opportunities for the two businesses and for Australian cotton growers”.
“A combination with Olam would bring significant benefits to Namoi including access to Olam's global expertise, extensive customer franchise and track record of driving growth in its businesses as demonstrated in its Queensland Cotton’s success,” says Olam’s CEO and co-founder Sunny Verghese in a letter to Namoi executive chairman Tim Watson detailing the non-binding indicative offer.
“Acquiring Namoi is in line with Olam’s strategy of strengthening and expanding its cotton merchandising and ginning capabilities in Australia.
“Namoi’s assets, which include gins, grain and cottonseed storage facilities, warehouses and access to rail transport, would be highly complementary to Olam’s existing operations.”
Verghese also sees a potential acquisition by Olam enhancing its support and service offerings to Australian cotton farmers and communities while “leveraging its local market capabilities and global reach to support more sustainable cotton farming”.
“Being a cotton farmer ourselves in both Australia and Brazil, we understand and service cotton growers’ requirements better,” says Verghese.
“Given Namoi’s long-standing reputation, it is Olam’s intention to continue to operate Namoi’s business under the Namoi Cotton brand and investing to grow the Namoi franchise profitability.”
The Namoi Cotton board has advised shareholders that they need not take any action at this stage.
Shares in Namoi Cotton surged 15 per cent to 57c in early trading following today’s announcement.
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