U.S. News

Singapore's Olam Raises Bid for Queensland Cotton


Commodities trader Olam International raised its takeover offer for Australia's Queensland Cotton to as much as A$166.5 million (US$136 million), beating a A$150 million rival bid from Louis Dreyfus Commodities.

The Singapore firm said in a statement on Monday that it would pay Queensland Cotton Holdings shareholders A$5.65 a share and increase that payment to A$5.90 if it gained control of more than 75.1% of Queensland's stock.

"We have maintained a friendly approach in all our dealings with Queensland Cotton throughout this process and are pleased the company's board has unanimously recommended our revised offer," Olam Chief Executive Sunny Verghese said in a statement.

Richard Haire, chief executive of Queensland Cotton, confirmed that the company was recommending the increased bid. However, if Louis Dreyfus increased its offer to outbid Olam, Queensland would switch to recommend the Dreyfus bid, he said.

"From the very first approach in November last year they (Olam) have been very pleasant to deal with ... very professional. There's no antagonism or issue with either party really," Haire told Reuters, adding that he had no idea if Dreyfus would return with a high offer.

A spokesman for Louis Dreyfus in Australia had no immediate comment.

Olam said it set the threshold for shareholders to receive the higher second tier price of A$5.90 at 75.1% of acceptances instead of 90%, enabling investors to accept the higher price regardless of Louis Dreyfus' plans regarding its 19.9 percent holding in Queensland.

Olam's unconditional offer comes after it first bid A$4.75 a share or A$142 million on March 7 in a deal recommended by Queensland's directors and which was last week trumped by agricultural conglomerate Louis Dreyfus Commodities B.V.

The latest offer is 4.4% higher than Queensland Cotton's Friday closing share price of A$5.41, while the second tier price of A$5.90 is 9% above the Friday close.

Louis Dreyfus' May 22 offer was 12% higher than Olam's March offer, and the board of Queensland Cotton recommended that shareholders accept the offer in the absence of a superior proposal. Olam's previous offer had received 13.9 percent acceptances.

Australia is the only major country in which Louis Dreyfus does not have a presence, and this deal would fill that gap. Also, Louis Dreyfus has only a small presence in the far west of the United States -- an area where Queensland Cotton has a significant presence.

World cotton prices have been slipped over the past year in the face of stiff competition from low-priced synthetics and from increased availability of lower quality cotton from India, Pakistan and China.