UPDATE 1-Aussie regulator flags competition concerns on Louis Dreyfus-Namoi Cotton deal

(Updates throughout with details and comments from regulator, and context on deal)

May 16 (Reuters) - Australia's competition regulator raised concerns on Thursday on Louis Dreyfus' proposed A$138.6 million ($92.85 million) acquisition of Namoi Cotton as both companies supply cotton ginning and cotton lint classing in the same country.

Dutch commodity merchant Louis Dreyfus Company (LDC), which already owns around 17% stake in Namoi Cotton, has been engaged in a bidding war with Singapore-based Olam Agri over the past few months to gain full control of the cotton ginning firm.

LDC and Namoi supply cotton ginning, cotton lint classing, logistics and warehousing services, and buy and market cotton lint and cottonseed in the country, the Australian Competition and Consumer Commission (ACCC) said in a statement.

"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.

"We are concerned it would result in LDC being able to reduce competition between these two cotton gins, which may result in higher prices or reduced service levels for ginning services."

The regulator is also consulting on a draft proposal put forward by LDC to address the competition concerns it raised by undertaking divestments.

On May 8, Olam Agri revised its previous proposal and decided to offer Namoi shareholders A$0.70 per share, valuing Australia's largest cotton producer at A$144.9 million.

Shares of Namoi Cotton, which have soared 56% so far this year, were trading 4% lower at A$0.72, as of 0018 GMT.

($1 = 1.4928 Australian dollars) (Reporting by Sneha Kumar; Editing by Sherry Jacob-Phillips)