Australia’s largest cotton processing business, Namoi Cotton Limited, has received a takeover bid from Singaporean-based farming business Olam Agri Holdings Limited for a total cash consideration of $0.59 per share.
This includes Namoi being permitted to pay a special dividend of $0.01 per share as part of the total cash consideration - which amounts to around $122 million.
Namoi operates 11 cotton gins in regional NSW and QLD, and operates a cotton marketing business through its joint venture with Louis Dreyfus Company, Namoi Cotton Alliance (NCA) established in 2013.
The recently made offer also provides that Olam is willing to contemplate concurrently making an off-market takeover bid for total cash consideration of $0.57 per share - inclusive of the $0.01 per share permitted special dividend.
It comes two months after Namoi entered into a scheme implementation agreement (SIA) with Louis Dreyfus Company Asia Pte. Ltd (LDC), another global agriculture business, to acquire the remaining 83 per cent of issued shares in Namoi that it did not currently own.
Under the scheme, Namoi shareholders would receive a total cash consideration of $0.51 per share. This total cash consideration included the business paying a special dividend of $0.01 per share to its shareholders after April 1 and prior to scheme implementation.
The Namoi board is considering the Olam offer in context of its exclusivity obligations under the SIA agreement, which includes “no shop”, “no talk” and “no due diligence” - the latter two are subject to a customary fiduciary exception - as well as “notification” and “matching right” to LDC, and circumstances in which Namoi may be required to pay a break fee to LDC.
Blackpeak Capital is acting as financial advisor to Namoi, while KWM is acting as legal advisor.
Meanwhile, global law firm Baker Mckenzie is advising Olam on its takeover bid.
The recent offer comes as Namoi reported an operating net cash drop of $886,000 in the third quarter of FY24, with year-to-date operating cash flow up by $31 million.
Receipts from customers were at $8.2 million for the latest quarter, and up by $658.7 million in year-to-date.
The company is expecting cotton modules being delivered for ginning this month.
Australian cotton production in the 2024 season is forecast to be above average but less than the 2023 season of 5.6 million bales. Cotton Australia has predicted 4.5 million bales for the latest season.
Based on forecast productions, Namoi expects to gin 0.9 to 1.1 million bales of cotton in 2024 (FY25).