Australia’s largest cotton ginner Namoi Cotton Limited has told its shareholders to reject the all-cash takeover offer of $0.67 per share by international agriculture business Louis Dreyfus Company.
In the same swoop, the cotton ginner recommended that shareholders take no action against global agriculture business Olam Agri Holdings Limited’s own all-cash takeover offer of $0.70 per share, saying it is waiting for the company’s target statement before Namoi’s directors decide on the course of action.
Namoi’s reasoning for the rejection of LDC’s offer was due to it being lower than the Olam offer, with an independent expert concluding that the offer is not fair and not reasonable in light of the Olam offer.
The latest news comes after the ACCC published its own statement of issues outlining preliminary competition concerns with LDC’s proposed acquisition of Namoi.
The consumer watchdog is concerned that the proposed acquisition would be likely to substantially lessen competition in the supply of cotton ginning services in the north of Western Australia and Northern Territory and the supply of cotton lint classing services.
The ACCC is also considering whether the proposed acquisition may substantially lessen competition in the marketing of cotton lint and seed.
“If this acquisition proceeds, LDC will be involved in operating the only two cotton gins in the north of Western Australia and Northern Territory,” ACCC commissioner Stephen 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.”