One of the world's biggest cotton merchants, Louis Dreyfus Commodities, is planning to buy about 13 percent stake in Namoi Cotton Co-operative Ltd, an Australian cotton growers' co-operative.
According to Bloomberg reports, Namoi will sell its cotton marketing and commodities packing assets for $32.1 million (A$30.4 million), the Wee Waa, New South Wales-based company said in a press statement, Wednesday. The Australian cotton grower co-operative will also sell $3.8 million ($A3.7 million) worth of its shares to Louis Dreyfus. It also reported that the co-op will hold a 51 percent stake in the joint-venture and will henceforth be known as Namoi Cotton Alliance, whereas Louis Dreyfus will have 49 percent. Namoi will, however, maintain its cotton ginning and seeds business.
The companies will set up a joint venture to market the co-op's output, which accounts for about a quarter of Australia's annual crop, reported Reuters.
"The deal will allow the global Louis Dreyfus Commodities business greater exposure to additional cotton volumes to meet the needs of its international customers," CEO of Louis Dreyfus' Australian division, Robert Green said in a press release.
As the market closed in Sydney, Namoi witnessed the biggest gain since October 2011 after its shares surged 25 percent to 30 Australian cents.
The deal gives the co-op Dreyfus' financial firepower, global marketing expertise and risk management following a year-long endeavor to raise cash and pay off debt to secure Namoi's future.
"The joint venture will create a strong marketing business whilst retaining important grower member co-operative involvement. The capital raised will strengthen Namoi Cotton's balance sheet," said Namoi CEO, Jeremy Callachor, in a statement Tuesday.
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