Namoi Cotton urges shareholders to sell to Olam

An independent expert's report by financial services group, BDO, has officially concluded the Olam bid of 70 cents a share is fair and reasonable.

Olam Agri, which owns Namoi's biggest cotton ginning and marketing rival, Queensland Cotton, has offered three cents a share more than Louis Dreyfus.

Late last week LDC extended the closing date of its cheaper offer for the NSW-Queensland based cotton ginning company to June 21, having picked up more than 2 million shares during May, despite Namoi's board saying its price was "not fair and reasonable".

Namoi is Australia's biggest ginning business with 10 gins and a Gwydir Valley joint venture with Sundown Pastoral Company, plus an 18pc stake in the Kimberley Cotton Company gin being built at Kununurra in West Australia's north.

French-owned LDC, which began the bidding battle for Namoi six months ago, is also a marketing joint venture partner with Namoi, holding an 18.2 per cent stake in the company, too.

LDC has its own ginning operations at Emerald, Dalby and Moree acquired from Dunavant Enterprises' and is the management partner in WANT Cotton's new Katherine gin, which began operating this year.

Olam currently owns just 1pc, or 2.1m Namoi shares, acquired in mid-May.

Namoi Cotton's five independent directors, led by executive chairman Tim Watson, have unanimously supported the Olam bid saying they intended to sell their own shares, in the absence of a better offer emerging.

LDC-aligned director, Sarah Scales, abstained from making any recommendation.

Also supporting the Olam deal is Namoi's biggest shareholder, the Samuel Terry Asset Management investment group, which owns 25pc of the ginning, classing, marketing, storage and grain packing business.

However, LDC has previously made clear it did not intend to sell its shareholding, therefore dashing Olam's hopes for full ownership.

Directors noted Olam's offer valued Namoi at a substantial premium to the company's undisturbed historic market price and a premium to LDC's takeover offer price.

If Olam's offer was not accepted they said Namoi shares may subsequently trade below 70c and share market trades would also incur brokerage fees.

"The independent directors believe the offer provides an opportunity for Namoi shareholders to realise certain value in cash in the near term which may not be achieved if the offer does not proceed," the company's target statement said.

"The independent directors unanimously recommend, in the absence of a superior proposal and subject to the independent expert continuing to conclude the offer is fair and reasonable for shareholders, Namoi shareholders accept the offer."