Did the good rains last week and a slight improvement in weather conditions produce a higher counter offer for Queensland Cotton from Louis Dreyfus, the world’s largest cotton trader?
Probably not,conditions in the bush have changed for the better in many regions but cotton doesn’t seem to be one of them.
Dreyfus yesterday sprang the offer, worth 12 per cent more than Olam International Ltd’s offer of around $4.75 a share.
Dreyfus, which already owns 20 per cent of QCH, said it would bid $5.31 a share in cash for the shares it doesn’t own, valuing the company at $149.8 million.
Singapore-based Olam had bid $4.75 a share, with a 30c a share bonus on top of that if it had reached the 90 per cent acceptance level. The new offer now puts the onus on them to come back with a higher price, if they want control.
The Dreyfus move was sort of expected after it battled the QCH board and management to the Takeovers Panel to win the right to do due diligence.
After approval from the Panel, Dreyfus undertook to do its diligence on Queensland Cotton with a deadline of yesterday, May 22, for any counter-offer.
That duly came with a board recommendation.
The Singapore bid was made on the basis that it was friendly to existing management but relations with Dreyfus were more strained, leading to speculation that if the French company wins, the QCH managers will go.
QCH is the fifth-largest cotton exporter in the world but it has been hit by the drought, like so many other companies and farmers in rural and regional Australia.
Dreyfus is also a major international grain trader where it has been active in the local market, but on a smaller scale. It was looking for an end to the single desk system of wheat marketing. It would have been disappointed on that issue with the single desk remaining under grower control.
QCH shares jumped to a high of $5.45 yesterday after the counter offer was produced. They closed at $5.47, up 36c.
Queensland Cotton operates eight processing plants in Queensland and New South Wales and 17 gins in Arizona and California. It also sells fertilizers and chemicals used by cotton growers.
The Dreyfus offer has the unanimous recommendation of the Queensland Cotton board, provided a superior bid does not emerge and according to a company statement,each QCH director intends to accept the offer in respect of all the shares they control.
“The offer is superior to the Olam offer announced on March 7, 2007,” said Queensland Cotton chairman John Reynolds said in a statement yesterday.
“We welcome the materially higher price of the offer and note it is not conditional upon a minimum level of acceptances, which provides it with a high level of certainty,” he said.
