Olam strikes again to outbid Dreyfus in battle for Namoi Cotton

The Singapore-based parent to Queensland Cotton moved swiftly to raise the stakes 17 per cent to beat a cash offer of 60c/share from Namoi's marketing partner, Louis Dreyfus Company, pitched early this week.

The Olam deal values the 61-year-old listed ginning business at almost $145 million.

Olam, which previously indicated it was looking at paying up to 58c, has confirmed it would now lift its starting price to 66c, if it gained at least half the big cotton ginning company's shares.

Its off-market takeover offer price would jump to 70c/share if it got 90pc of the company's stock by the end of the bidding war.

Namoi executive chairman, Tim Watson, said his board, which has already supported the Louis Dreyfus bid, pending a better offer landing on the table, would now re-assess the situation.

He said the new price was "certainly getting up there" and a significant gain on Namoi's Australian Securities Exchange price of 35.5c in late November, before LDC announced it was looking at buying the remaining 83pc of the ginning business which it did not already own.

The cotton company's biggest shareholder, with almost a quarter stake, Samuel Terry Asset Management, swiftly switched its support back to Olam.

Olam's latest 70c/share bid values the takeover target at almost $144.8m - well above the $122m Olam previously budgeted for with its March indicative, non-binding quotes of 47c and 48c a share.

The new offer is also much higher than this week's 60c Louis Dreyfus bid, which valued Namoi at just over than $124m.

The NSW-Queensland-based Namoi is Australia's biggest cotton ginning business with significant logistics and grain packing operations.

It was born as a farmer co-operative in northern NSW's Namoi Valley a year after the modern cotton era's pioneers began growing the crop near Wee Waa.

Olam and the French-owned farm commodities giant, Louis Dreyfus, have both committed to maintaining the well known Namoi business brand if they win the takeover battle.

Both bidders will need regulatory approval from the Foreign Investment Review Board and the Australian Competition and Consumer Commission.

"Olam is pleased to formalise its intention to acquire Namoi's shares," said Olam co-founder and group chief executive officer, Sunny Verghese.

He said Olam had significant global cotton industry expertise, including its Australian and Brazilian operations, and also as a grower in South America.

In Africa the company supported a network of 340,000 farmers improving their farming practices and earnings.

"This international experience and deep local knowledge, coupled with our credentials as one of the world's largest private cotton ginners, positions us perfectly to support Namoi and foster its growth," Mr Verghese said.

"Olam has a deep understanding of the needs and challenges associated with producing and merchandising high quality cotton.

"We have operated as a cotton grower, ginner and merchant in Australia since 2007, through our wholly owned subsidiary, Queensland Cotton.

"This long experience has allowed us unique insights into the Australian cotton industry where we have built strong relationships across the supply chain."

Olam Agri, is part of the bigger Olam Group, but also 35pc owned by Saudi Arabia's Public Investment Fund.

Olam bought Queensland Cotton 17 years ago after QC and Namoi had been in merger talks and Namoi rejected takeover approaches from its northern rival.

Louis Dreyfus has had a close involvement with Namoi Cotton as its lint marketing partner during the past decade, building its shareholding in the business and its joint venture partnerships Namoi Cotton Alliance and Namoi Cotton Marketing.