Cotton gins up competitive M&A spirits

Namoi Cotton

07/05/2024 12:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own. Refiles to update hyperlink.)
    By Antony Currie
       MELBOURNE, May 7 (Reuters Breakingviews) - Drama is
often easy to find in Australian M&A deals. Last year, for
instance, Canadian investment house Brookfield Asset Management
 BAM.TO  was stymied in its A$20 billion ($13 billion) pursuit
of Origin Energy  ORG.AX ; and Albemarle  ALB.N , the world's
largest lithium producer, had to abandon its deal for Liontown
Resources  LTR.AX . Both, though, lost because interlopers
blocked the transactions, not because a rival bested their
offer. In fact, there's often a dearth of such competitive
battles Down Under. Louis Dreyfus and Singapore's Olam Agri
 IPO-OLAA.SI  may change that.
    The two commodity trading houses have between them lobbed
five bids for Namoi Cotton  NAM.AX , Australia's largest ginner
of the fibre. It's a tiddler of a deal: the latest offer on
Tuesday, from the European behemoth run by Michael Gelchie,
values the enterprise just shy of $120 million. Such small
battles, though, can set the tone for the broader market. 
    That was the case three years ago, when a unit of Macquarie
 MQG.AX  finally secured berry and avocado grower Vitalharvest
Freehold Trust after a months-long tussle with private equity
house Roc Capital that spawned 19 bids. Other buyout shops
including Blackstone  BX.N  and KKR  KKR.N  were at the time
vying for multi-billion-dollar assets from casino Crown Resorts
to mortgage-settlement firm PEXA  PXA.AX  . 
    These capped the busiest year for competed deals Down Under
in more than a decade. Such transactions have quietened down
since, in part because rising interest rates pushed up borrowing
costs; investment bankers must be hoping the contest for cotton
will reinvigorate them.
    Louis Dreyfus and Olam Agri may well have a few more rounds
in them over Namoi, a rehash of a similar contest between the
two in 2007 for Queensland Cotton, which Olam won.
    The trick is not to get carried away. Louis Dreyfus's latest
offer is an 89% premium to Namoi's undisturbed price. That's
getting into nosebleed territory.
    Follow @AntonyMCurrie on X
         
    CONTEXT NEWS 
      Louis Dreyfus on May 7 increased its offer for Australia's
Namoi Cotton by almost 12% to A$0.67 a share, valuing the
country's largest ginner of the fibre at A$139 million ($92
million) excluding debt.
    It is the second time Louis Dreyfus has bumped up the price
since details of its first offer of A$0.51 a share were made
public on Nov. 28. It has been doing so in response to two
counter-offers from Singapore's Olam Agri, the first on March 21
and the second on May 2.
    The new bid represents an 89% premium to Namoi's share price
on Nov. 27.
    
($1 = 1.5097 Australian dollars)

 (Editing by Robyn Mak and Aditya Sriwatsav)
 ((For previous columns by the author, Reuters customers can
click on  CURRIE/ 
antony.currie@thomsonreuters.com; Reuters Messaging:
antony.currie.thomsonreuters.com@reuters.net))