$109m offer for Namoi Liliana Molina 14jul05 AUSTRALIA'S largest cotton company could get even bigger after Brisbane-based Queensland Cotton yesterday launched a $109 million takeover bid for rival Namoi Cotton.
The offer is Queensland Cotton's second attempt to buy the NSW group after a failed attempt nine years ago.
The combined company would have a market capitalisation of more than $200 million and would handle more than half of the national cotton crop through the 14 Namoi gins and eight Queensland Cotton gins.
It would become one of the 10 largest cotton companies in the world and one of the largest supplying high grade cotton.
Queensland Cotton chief executive officer Richard Haire said there was minimal duplication between the two companies as the cotton each handled was divided along state lines.
"It's been a long-held dream of this group to put these two companies together," Mr Haire said. "We prefer to see this not as an acquisition, but about putting the two companies together."
Namoi Cotton chief executive officer Bob Bell said the offer had been unsolicited. It would be complex to assess its value because of its co-operative structure.
"We were a little surprised," Mr Bell said. "Our risk management strategies have been proven and that has brought attention to a company that's performing in tough times."
The ongoing drought hit both Namoi and Queensland Cotton's most recent results. The co-operative posted an after-tax profit for 2004-2005 of $8.7 million with a forecast of $13.5 million in 2006.
Queensland Cotton's 2005 result was down to $6.3 million and it downgraded its 2006 profit by $5 million to $10 million in mid-June.
Under the deal, Namoi grower members would receive $2.70 a share and ordinary shareholders 71¢.
Both companies have been in a trading halt with Namoi's shares last trading at 61.5¢ and Queensland Cotton at $3.66.
"We think the offer we've put before the Namoi board is a very attractive offer in financial terms," Mr Haire said. "We would have liked to have seen more engagement and more direct engagement by their directors and we're hoping that will come."
The cotton industry has been hurt in recent seasons by continuing low world prices falling as low as half the cost of production, drought and a world oversupply.
World cotton production is expected to fall by 11 per cent in 2005-2006 and while Australia's 2004-2005 crop was up by 70 per cent to 600,000 tonnes, the area planted in 2005-2006 is expected to fall by 20 per cent.
Queensland Cotton's 2006 profit downgrade was caused by the marketer choosing to sit out low prices, only to have to sell its crop at lower than expected prices.
Mr Haire said he did not anticipate any competition issues if the takeover was successful and the name would change to reflect a more national approach.
The new company would take on Queensland Cotton's strategy of concentrating on supplying high-grade cotton and would continue growing its international interests.
Mr Bell said Namoi's co-operative structure made assessing the benefit of the deal difficult.
It was the first co-operative to retain its status and list on the ASX when it hit the boards in 1998.
The co-operative yesterday advised shareholders to hold off on any action and warned the transaction might not go ahead.
NAM Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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