Namoi shares sink on ACCC concerns
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More news: Namoi Cotton shares plunged in morning trading on the ASX after the competition regulator flagged concerns with Louis Dreyfus Company's proposed acquisition of the Queensland cotton operator.
Namoi shares dropped 8% to $0.69 by 10:45am AEST.
ACCC outlines competition concerns over LDC's Namoi bid
The news: The Australian Competition and Consumer Commission (ACCC) has outlined competition concerns with Louis Dreyfus Company's (LDC) proposed acquisition of Queensland cotton operator Namoi Cotton.
The numbers: French agri commodities group LDC is Namoi's second-biggest shareholder with a 16.99% stake in the company.
Last week, LDC tabled an improved takeover offer of 67 cents a share for Namoi, which was topped a day later by rival suitor Olam Agri Holdings, with an offer of 70 cents a share.
The context: The competition regulator has flagged concerns that an LDF takeover of Namoi would likely substantially lessen competition in the supply of cotton ginning services in the north of Western Australia and Northern Territory, and the supply of cotton lint classing services.
In Australia, LDC and Namoi both supply cotton ginning, cotton lint classing, logistics and warehousing services, as well as engaging in the acquisition and marketing of cotton lint and cottonseed.
The ACCC said it is also considering whether the proposed acquisition may substantially lessen competition in the marketing of cotton lint and seed.
The regulator's concerns regarding the north of WA and NT stem from the emergence of two new cotton gins in Katherine and Kununurra.
Namoi has been contracted to build and operate the Kununurra cotton in and is a minority shareholder of that gin's holding company. Meanwhile, LDC has entered into a joint venture for the management and operation of the Katherine cotton gin, due to commence operations in mid-2024.
The ACCC is also investigating the impact of the proposed acquisition on LDC's ability and incentive to negatively impact rival merchants' access to cotton lint, and its ability to limit access to or increase prices for warehousing services for the export of cotton out of the Port of Brisbane.
What they said: ACCC commissioner Stephen Ridgeway said: "If this acquisition proceeds, LDC will be involved in operating the only two cotton gins in the north of Western Australia and Northern Territory".
"We are concerned it would result in LDC being able to reduce competition between these two cotton gins, which may result in higher prices or reduced service levels for ginning services," he said.
The source: ASX announcement
