Cotton gins up competitive M&A spirits
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.
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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
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