UPDATE 2-Australia regulator raises concerns over Olam's $97 mln bid for Namoi Cotton

(Updates with share moves in paragraph 2)

June 20 (Reuters) - Australia's competition regulator said on Thursday the proposed acquisition of Namoi Cotton by Singapore's Olam Agri for A$144.9 million ($96.7 million) raised competition concerns in the supply of cotton ginning services.

Namoi Cotton's shares slipped as much as 7.2% to A$0.645 by 0104 GMT, while the broader benchmark S&P/ASX 200 index was flat.

The affiliate of Singapore's Olam Group and Dutch commodity merchant Louis Dreyfus Company have been engaged in an international bidding war to take control of Namoi, which would help them expand their footprint in Australia.

Namoi and Olam, through its unit, Queensland Cotton, supply cotton ginning, cotton lint classing, logistics and warehousing services in Australia. Both firms are also involved in the acquisition and marketing of cotton lint and cottonseed.

"The proposed acquisition would reduce the number of competing ginning suppliers in the Lower Namoi Valley from three to two, with Olam operating four of the five cotton gins if the acquisition proceeds," Australian Competition and Consumer Commission (ACCC) Commissioner Stephen Ridgeway said in a statement.

If the acquisition goes through, only one alternative cotton gin in the Lower Namoi Valley region operated by Australian Food and Fibre would exist, Ridgeway added.

The possibility of reduced competition could result in higher prices for cotton growers in the region, the regulator said, while also flagging concerns around the impact on the supply of cotton lint classing services in Australia.

Olam and Namoi did not immediately respond to a Reuters request for comment.

($1 = 1.4986 Australian dollars) (Reporting by Roushni Nair in Bengaluru; Editing by Kim Coghill and Jamie Freed)