Louis Dreyfus launches Namoi Cotton takeover after profit rebound

The 61-year-old Namoi's board of directors and its biggest shareholder, Samuel Terry Asset Management, have indicated they would support the offer, if it proceeded and was approved by competition and foreign investment regulators.

Shareholders would be offered a 44 per cent premium of 51 cents each for Namoi shares, which had closed at 35c at the end of trading on Monday.

The share price jumped to 48c after news of the bid emerged on Tuesday morning.

Louis Dreyfus' indicative offer values Namoi at about $109m.

The modern industry pioneer is Australia's biggest cotton processor with 10 gins spread from the Queensland-NSW border to Hillston in the western Riverina, plus another joint venture operation under construction in Western Australia's Ord irrigation area.

Founded in Wee Waa in North West NSW, but now headquartered at Toowoomba, the former farmer co-operative also has grain and cottonseed storage and 275,000 tonnes of containerised grain packing capacity.

Under the proposed new owner's plan, all ginning assets, the Namoi Cotton brand and its Queensland head office would remain as they are.

Coincidentally, 18 years ago Namoi rebuffed a takeover bid from northern market rival, Queensland Cotton, which had valued Namoi at the same $109m price tag as the current offer.

Soon after Queensland Cotton was bought by big Singaporean agricultural commodity player, Olam.

The latest takeover bid follows closely behind Namoi Cotton reporting a big turnaround in profits after years of drought and wet weather-related setbacks.

Last month it posted a 200 per cent jump in statutory profit after tax of almost $12m for the first half of 2023-24.

Louis Dreyfus Company - one of the world's biggest grain marketing, shipping and food processing businesses - already has its own gins at Emerald and Dalby in Queensland and Moree in NSW.

It has been a joint venture partner with Namoi for 10 years, initially through the Namoi Cotton Alliance marketing, packing and warehousing partnership, which was then split in 2021 so all lint marketing activities were managed by LDC.

Namoi's decision to withdraw from direct involvement in cotton marketing was largely triggered by drought severely stretching its finances and the cash demands involved in funding trading activities.

Louis Dreyfus holds a 17pc stake in Namo's share register, behind the 21.5pc held by Sydney-based investment group, STAM.

The takeover move follows a strategic review of the company's growth options initiated in July, which at the time raised industry eyebrows and prompted talk of fresh joint venture or takeover plans afoot.

Chairman, Tim Watson, said the detailed review by boutique advisory firm, Blackpeak Capital, concluded a merger with Louis Dreyfus was "the most preferred outcome".

"Combining Namoi's ginning business with LDC is designed to create a strengthened and sustainable business for our grower customers and staff," he said.

"This proposal builds on our existing relationship with Louis Dreyfus in our lint marketing and warehousing joint venture business for the past decade."

Namoi will even help pay for the multinational to do its due diligence on the cotton company's books during an exclusivity period from December 27 to January 31 next year, refunding up to $500,000 in costs.

After the four week period Namoi directors will be free to deal with potentially superior bid proposals, should they emerge.

Mr Watson noted, at this point, there was no certainty the engagement between the two parties would result in a binding takeover proposal capable of being recommended to proceed to transaction.

Shareholders would be kept informed with developments relating to Louis Dreyfus non-binding intentions, or any counter-bid, and were not expected to take any action at this stage.