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Namoi Cotton (ASX: NAM) looks set to be absorbed by one of its major shareholders and joint venture partners, the Singapore-based agricultural group Louis Dreyfus Company Asia (PDC), which has launched a full takeover that values Australia’s largest cotton ginning company at $105 million.
Namoi revealed to the ASX this morning that PDC has put forward a non-binding, indicative and conditional offer to acquire the 83 per cent of shares in the Toowoomba-based company it doesn’t already own for 51 cents per share (cps).
The offer price is pitched at a massive 43.6 per cent premium to Namoi’s previous closing price of 35.5c a share yesterday, putting a rocket under the company’s share price today which shot up to a high of 48c by 11am (AEST).
The price being offered by PDC includes a 1c dividend, making the cash consideration 50c a share.
Namoi says its major shareholder Samuel Terry Asset Management, which holds a 21.5 per cent stake in the company, has already expressed its support for the takeover bid. The Namoi board also sees the proposal as being in the best interests of all shareholders.
LDC’s move comes on the heels of a strategic review announced by Namoi Cotton earlier this year following the resignation of CEO John Stevenson.
Tim Watson was elevated to executive chairman following Stevenson’s departure in June which was followed by the resignation of CFO Sonya Ryan in October.
A successful bid would see LDC take control of Australia’s largest cotton ginner and its network of 10 cotton gins in NSW and southern Queensland.
At the company’s annual general meeting in July, Watson lamented the depressed Namoi Cotton share price which he said did not reflect the book value or replacement value of the company’s assets.
LDC’s bid has also been buoyed by a strong half-year result in which EBITDA rose 35 per cent to $26.9 million, while profit before tax surged 45 per cent to $16.8 million compared to a year earlier.
The latest result was aided by higher earnings from ginning operations and joint ventures as conditions returned to normal following drought and COVID.
LDC, a global agricultural merchant and processor with extensive interests in textiles, bioenergy, plant proteins, animal feed and pet food, is Namoi’s joint-venture partner in Namoi Cotton Alliance and Namoi Cotton Marketing Alliance.
Watson today revealed that the proposed takeover is the preferred outcome of the strategic review.
“Combining Namoi’s ginning business with LDC is designed to create a strengthened and sustainable business for our grower customers and staff,” Watson says.
“This proposal builds on our existing relationship with LDC in our lint marketing and warehousing joint venture business for the past 10 years.”
Namoi says that LDC ‘values the capability and relationships built by Namoi over the past 60 years and intends to operate all Namoi’s gins in the normal course, maintain an office in Toowoomba and retain the Namoi Cotton brand name’.
Namoi Cotton has granted LDC permission to undertake exclusive due diligence ahead of the major shareholder forwarding a binding offer.
The company says that Sarah Scales, LDC’s appointed representative to the Namoi board, is abstaining from making a recommendation to shareholders.
However, the board says that should a binding proposal be forwarded by LDC it intends to recommend that Namoi shareholders vote in favour of the transaction in the absence of a superior proposal being received.
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