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Highlights
- ACCC raises competition concerns about Olam Agri's Namoi Cotton bid.
- Olam Agri may need to divest assets to proceed with the acquisition.
- Namoi shares fell 3.50% after ACCC's statement.
The potential acquisition of Namoi Cotton Ltd (ASX:NAM) by Singapore-based Olam Agri Holdings has encountered new regulatory challenges. The Australian Competition and Consumer Commission (ACCC) has raised concerns over the deal, indicating that Olam Agri may need to divest some of its assets before the takeover can proceed.
Two weeks ago, Olam Agri, through its subsidiary Olam Agri Australia Pty Ltd, increased its offer for Namoi Cotton to $0.75 per share, up from the initial bid of $0.66 per share. The move comes as Olam competes with Louis Dreyfus Company (LDC), whose offer stands at $0.67 per share. Both companies have been vying for control of Namoi since May 2024.
ACCC's Competition Concerns
The ACCC expressed concerns that Olam Agri’s acquisition could reduce competition in the supply of cotton ginning services in New South Wales' Lower Namoi Valley, as well as in the nationwide supply of cotton lint classing services. Olam Agri would control four of the five cotton gins in the region, and hold significant interests in two major classing companies, ProClass Pty Ltd and Australian Classing Services Pty Ltd, which manage over 80% of Australia’s cotton lint.
To address these concerns, the ACCC is considering a court-enforceable undertaking that would require Olam Agri to divest its Queensland Cotton gin at Wee Waa in New South Wales, along with its 20% stake in ProClass Pty Ltd.
This is not the first time the ACCC has intervened in the competition between Olam Agri and LDC. Earlier in the year, the regulator addressed similar concerns with LDC’s bid, which were resolved through divestment in the cotton ginning and lint classing sectors.
ACCC's Next Steps
ACCC Chair Gina Cass-Gottlieb highlighted the importance of ensuring the acquisition doesn’t harm competition, particularly in the Lower Namoi Valley and across the broader cotton lint classing services in Australia.
“In assessing Olam’s proposed undertaking, we will need to be satisfied that it will effectively address our competition concerns in the supply of cotton ginning services in the Lower Namoi Valley in New South Wales and the supply of cotton lint classing services Australia-wide, as well as being structured in a way that is practical and effective,” she stated.
The ACCC is also examining how the acquisition could influence coordination between companies in cotton lint marketing, warehousing, and other regional ginning markets, citing potential "multiple linkages" between Olam and LDC if Olam’s bid for Namoi Cotton succeeds.
Impact on Namoi Cotton
Several Namoi shareholders have expressed support for Olam Agri’s offer. However, following the ACCC’s concerns, Namoi shares dropped by 3.50%, trading at 69 cents as of 12:24 AEST. The future of the acquisition now hinges on whether Olam Agri can address the ACCC’s competition concerns through divestment and restructuring.
