Bloomberg News

Louis Dreyfus Partners With Namoi to Rival Olam in Cotton

January 16, 2013

Louis Dreyfus Commodities Group, the world’s biggest cotton merchant, agreed to partner with Namoi Cotton Co-operative Ltd. (NAM) to sell fiber from Australia, intensifying competition with Olam International Ltd. (OLAM)

Namoi will sell its cotton marketing and commodities packing assets into the venture for A$30.4 million ($32.1 million), the Wee Waa, New South Wales-based company said today in a statement. Louis Dreyfus will also buy A$3.7 million worth of Namoi shares.

The venture will give Louis Dreyfus increased access to cotton from Australia, the world’s fourth-largest shipper. Namoi markets about 30 percent of the nation’s crop, while Louis Dreyfus handles about 20 percent. Louis Dreyfus tried to capture more market share in 2007 with its failed bid for Queensland Cotton Holdings Ltd., which was bought by Singapore-based Olam.

The venture will allow “the global Louis Dreyfus Commodities business greater exposure to additional cotton volumes to meet the needs of its international customers,” its Australian Chief Executive Officer Robert Green said in the statement.

Namoi surged 25 percent to 30 Australian cents at the close in Sydney, the biggest gain since October 2011. Olam, one of the world’s six largest cotton traders, processes and exports cotton from Australia.

Cotton Exports

Namoi Cotton will hold a 51 percent stake in the joint- venture to be known as Namoi Cotton Alliance, and Louis Dreyfus will have 49 percent, Namoi said in the statement. Namoi will retain its cotton ginning and seeds business.

Louis Dreyfus will buy a quantity of cotton each season from the venture, Namoi said. Louis Dreyfus will continue to operate its existing business in competition with Namoi Cotton Alliance, it said.

Cotton exports from Australia are set to climb to a record 1.1 million metric tons in the year that started July 1, the Australian Bureau of Agricultural and Resource Economics and Sciences said Dec. 11. Production is set to total 945,000 tons in 2012-2013, from 1.2 million tons a year earlier, it said.

Namoi’s board unanimously recommended grower members accept the offer, it said. Funds raised from the deal will be used to reduce debt, the company said.

In August, Australian Treasurer Wayne Swan approved the sale of Cubbie Group Ltd., the nation’s biggest cotton grower, to Shandong RuYi Scientific & Technological Group Co. Ltd. and Lempriere Pty.

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net


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