Wednesday 16th November 2011
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New Zealand Wool Services International is planning to raise fresh capital once the High Court has decided whether or not Cavalier has clearance to make a bid for WSI.
“There is no point in initiating a capital raise until there is certainty on many questions which are currently unanswered,” WSI chairman Derek Kirke said in a statement.
However, WSI shareholders have been concerned and confused by the WSI board's silence on rival bidder Wool Equities' capital raising and had been asking WSI to clarify the situation.
After carpet-maker Godfrey Hirst appealed to the High Court against the Commerce Commission's clearance of Cavalier's $40 million bid for WSI, WEL said its newly established New Zealand Wool Investment Company (Woolco) wanted to raise capital to buy WSI. It has since announced a $77.4 million capital raising.
WEL and WSI are both listed on NZX's alternative exchange for smaller companies and WEL's market capitalisation is currently $4.6 million while WSI's is currently $33.8 million.
WSI's board “has been most reluctant to debate publicly the merits of the WEL/Woolco capital raise, preferring to leave WSI shareholders and wool growers to make their own carefully considered decisions,” Kirke said.
If Cavalier is able to buy WSI, it would have a monopoly over the New Zealand wool scouring industry.
Kirke said the outcome of the High Court appeal “is crucial to future action” and it would be irresponsible of WSI to make any capital raising decisions before that is known.
“Judging from enquiries to date, it is clear that a timely and properly planned WSI capital raise will enjoy strong shareholder, wool grower and industry support and the company is ready to launch this when the time is right,” he said.
He urged WSI shareholders and wool growers to keep capital available until the situation around the WSI shares which are currently in the hands of receivers is resolved.
WSI's two biggest shareholders, Plum Duff and Woolpak Holdings, with a combined 64 percent holding, are in receivership.
WSI is clearly hostile to Cavalier's bid to own a monopoly wool scouring business. Back in March, WSI said Cavalier's claim that such a monopoly would be the saviour of the New Zealand strong wool industry was “both mischievous and misleading.”
WSI shares last traded a week ago at 49 cents. The shares briefly hit 60 cents in April, their highest level since 2004, after the Commerce Commission cleared Cavalier's bid.
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