Australia Antitrust Concerns Tangle Namoi Cotton Bids

(Bloomberg) -- Australia’s antitrust watchdog has raised concerns around Olam Agri Holdings Ltd.’s proposed A$144 million ($96 million) takeover of Namoi Cotton Ltd., further complicating a tangled battle for one of Australia’s largest cotton processors.

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The Australian Consumer and Competition Commission, which has already highlighted similar worries over a bid from rival trader Louis Dreyfus, said Olam’s proposed acquisition would substantially lessen competition in processing of the textile fiber in a major growing region, according to a statement on Thursday.

The two companies have been jostling for Namoi since January in a bid to gain a larger foothold in the nation’s cotton industry, which is the world’s sixth biggest.

Olam currently has the superior offer and Namoi’s independent directors unanimously recommended in late-May that shareholders accept it. The ACCC ultimately approves any takeover, but can also decide to impose conditions intended to preserve competition in a concentrated market.

Australia’s cotton industry has only a handful of large players, with Namoi, Olam and Louis Dreyfus collectively owning more than half the nation’s 41 gins, or processing plants.

“Post-acquisition, there would only be one alternative cotton gin in the Lower Namoi Valley region,” potentially leading to higher costs for growers, ACCC Commissioner Stephen Ridgeway said in the statement on Olam’s offer. The watchdog is inviting submissions in response to its concerns by July 4 and plans to issue a decision in late August.

The regulator is currently looking at the risk of coordination in the cotton lint marketing sector through Olam and Louis Dreyfus’s common involvement in the Namoi Cotton Alliance and Namoi Cotton Marketing Alliance, it said Thursday.

Olam Agri and Namoi spokespeople didn’t immediately respond to requests for comment.

(Updates with details of bidding war from fourth paragraph)

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