Olam Agri proposes to acquire Australia’s Namoi Cotton for A$122 million

OLAM Group : VC2 0%’s indirect 64.57 per cent-owned subsidiary, Olam Agri, has launched a non-binding indicative offer to acquire all shares in Australian-listed cotton ginning company Namoi Cotton for A$122 million (S$107.8 million).

The consideration of A$0.59 per Namoi share comprises A$0.58 in cash and a permitted special dividend of A$0.01 per share, said Olam on Thursday (Mar 21) morning before the market opened.

Total cash payments under the proposed scheme are “compelling” and represent a “significant” premium of 16 per cent over an earlier offer for Namoi made by Louis Dreyfus Company Asia, it added.

Louis Dreyfus’ offer made on Jan 19, 2024, was at a total cash consideration of A$0.51 per share, to acquire a remaining 83 per cent interest in Namoi which the agriculture company did not own at the time.

Olam Agri intends to finance the acquisition with existing cash reserves as well as external debt funding.

However, it emphasised that the deal is not conditional on funding, nor is any equity raising being considered to fund it.

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Alternatively, the group said that it would be “willing to contemplate” making an off-market takeover bid to acquire Namoi for A$118 million, or A$0.57 per share, including a special dividend of A$0.01 per share.

While this would be less than total cash payments under the original scheme, Olam Agri said that this represents a “significant” 12 per cent premium over Louis Dreyfus’ A$0.51 per-share offer.

Olam’s alternative acquisition bid would only be made in the instance that its original proposed scheme is not approved by the requisite majority of Namoi shareholders (75 per cent of shares voted), or by the court.

The company would also have to have obtained a relevant interest in Namoi of at least 50.1 per cent on a fully diluted basis.

In its indicative offer document, Olam said that acquiring Namoi would be in line with its strategy of strengthening, as well as expanding its cotton merchandising and ginning capabilities in Australia. 

Namoi’s assets include gins – or “cotton engines” that separate cotton fibres from their seeds – along with grain and cottonseed storage facilities, warehouses, and access to rail transport.

These would all be “highly complementary” to Olam’s Agri’s existing operations, it said.

“We believe that our offer values Namoi at an attractive premium and delivers compelling value for your shareholders. We look forward to engaging collaboratively and to progress this offer in a timely manner, and ultimately continue our shared commitment to sustaining Australia’s farming future,” wrote Olam Agri’s co-founder and group chief executive, Sunny Verghese, in a letter to Namoi executive chairman Tim Watson. 

Later in the day, Olam announced that Namoi had confirmed receipt of the non-binding indicative offer.

Namoi’s largest shareholder Samuel Terry Asset Management, which has a 22.37 per cent interest in the cotton ginning company, also acknowledged Olam’s scheme and alternative proposals as “superior” to the existing offer made by Louis Dreyfus.

Samuel Terry said that it therefore intends to vote in favour of Olam’s proposal.

Shares of Olam were up S$0.03 or 3 per cent to S$1.02 as at the midday break on Thursday, before the group’s latest announcement.