UPDATE 2-Armajaro, Plexus Cotton end takeover talks

04/26/2013

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LONDON/NEW YORK, April 26 (Reuters) - Soft commodity giant Armajaro is no longer in talks to buy Plexus Cotton Ltd, a medium-sized cotton merchant, throwing into doubt the soft commodity trader's plans to expand its footprint in the volatile fibre industry.

The privately-held British companies were close to a deal in November last year, but were unable to agree on terms, the companies said in a joint statement on Friday. Further details were not known.

"Discussions have been discontinued by mutual agreement due to a failure to agree terms," the statement said.

A deal would have given Armajaro a British second-tier merchant in the small but volatile cotton industry, handling about 800,000 bales a year, according to trader estimates.

It also has farms and ginneries in Africa and a sales agency in China, the world's largest cotton producer and consumer. It reported $500 million in turnover in 2011, according to the most recent accounts.

Armajaro Trading had courted Liverpool-based Plexus for some time as part of a strategy to diversify its agricultural commodity portfolio. It trades cocoa, coffee and sugar.

The parent company, Armajaro Holdings Ltd, which was co-founded by Anthony Ward and Richard Gower, has an asset management unit as well as subsidiaries that trade financial instruments and vintage wines.

The acquisition would also have been one of the industry's first major deals since 2009 when Allenberg Cotton, a division of trading giant and the world's largest cotton merchant, Louis Dreyfus Corp, bought Dunavant Enterprises.

The long-time cotton firm was left reeling following 2008's price tumult.

Armajaro's talks with Plexus were in very different circumstances: Plexus chairman and owner Nick Earlam, who founded the company in 1990, was not under duress to sell.

Otherwise, there has been little major consolidation in the industry. In January, Louis Dreyfus announced plans to buy a 13-percent stake in Namoi Cotton Co-operative Ltd to expand its share of the lucrative Australian market.

The negotiations have ended as cotton's longest bull run in two years fuelled by speculative buying has faltered.

Spot prices were down 7 percent this month and off more than 12 percent from a one-year high of almost 94 cents per lb touched mid-March as hedge funds and other speculative investors have booked profits.

Even so, cotton's turnaround after two years of double-digit percentage losses on lower demand and a big surplus has surprised many traders.

Year-to-date, prices are still up 8 percent and cotton is the third-best performing asset in the Thomson Reuters-Jefferies CRB index, a commodities bellwether that tracks 19 mostly U.S.-traded markets. (Reporting by Sarah McFarlane in London and Chris Prentice in New York; Editing by Jane Baird and Marguerita Choy)



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