(Bloomberg) -- Australia’s regulator raised concerns that Louis Dreyfus Co.’s proposed takeover of Namoi Cotton Ltd. will likely reduce competition for processing services for some of the nation’s growers.

The Australian Consumer and Competition Commission said the proposed merger would “substantially lessen competition” for so-called cotton ginning services in the north of Western Australia and Northern Territory, and the supply of cotton lint classing services. Namoi shares slumped as much as 8%.

“If this acquisition proceeds, LDC will be involved in operating the only two cotton gins in the north of Western Australia and Northern Territory,” ACCC Commissioner Stephen Ridgeway said in a statement on Thursday. That “may result in higher prices or reduced service levels for ginning services.”

The acquisition of Namoi would support the long-term future and growth of the Australian cotton industry, and Louis Dreyfus is committed to investment in ginning infrastructure to ensure a competitive and thriving sector, an external spokesperson for the trader said in a statement.

The ACCC is also considering whether the proposed takeover by Louis Dreyfus — which already owns about 17% of Namoi Cotton — may substantially lessen competition in the marketing of cotton lint and seed. The regulator has invited submissions in response to the statement of issues by May 30.

Read More: Major Crop Traders Are Dueling to Take Australia’s Cotton Crown

Louis Dreyfus and rival trader Olam Agri Holdings Ltd. have been jostling to buy Namoi Cotton since January. The latest superior offer is from Olam Agri, which values the target company at around A$144 million ($97 million). The ACCC is assessing the bid and is set to release its review on July 4.

Australia has 41 processing plants, known as gins, according to industry group Cotton Australia. Namoi has 10, while Olam Agri’s Queensland Cotton unit operates nine, including two joint ventures. Louis Dreyfus has three. 

(Updates with Louis Dreyfus response in fourth paragraph.)

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