Wool scouring shake-up likely if ownership changes

Wednesday 9th February 2011

Cavalier Wool Holdings said it will rationalise the wool scouring industry if it is allowed to buy the souring business of rival New Zealand Wool Services International (WSI).

Cavalier Wool Holdings has applied to the Commerce Commission to buy 100% of WSI's wool scouring assets even though WSI said last week that they were not for sale.

WSI has said that the purchase of its assets by its rival will create a monopoly in the wool scouring industry, which will not be in the best interests of wool growers.

Cavalier Wool Holdings owns two wool scouring plants, in Hawke's Bay and in Timaru, while WSI has scouring plants in Hawke's Bay and near Christchurch.

"CWH has played a key role in the rationalisation of the industry over many years - more recently, when it was involved in the acquisition and successful rationalisation of the scours owned by Godfrey Hirst NZ Ltd in April 2009 - and sees this latest initiative as critical to having a world class scouring industry that can continue to represent New Zealand on the world stage," Cavalier Corp managing director Wayne Chung said.

Cavalier Wool Holdings is 50% owned by Cavalier Corp and 25% by each of Direct Capital and ACC. Cavalier Corp has other subsidiaries involved in wool procurement and in the manufacture of carpets.

The board of WSI has said it made it clear to Cavalier that WSI's wool scouring assets are not for sale.

However, the ownership of WSI itself is in a state of change as the owners of 63.87% of WSI are in the hands of receivers who have sought expressions of interest.

The commission said that it must first determine whether the relevant acquisition has the effect of substantially lessening competition in a market. If it does not, the commission may give clearance for the acquisition.

If it does, the commission must determine whether any benefits to the public of New Zealand arising from the acquisition outweigh the detriments due to the loss of competition. If there is a net positive public benefit the commission must authorise the acquisition which may occur notwithstanding the loss of competition arising.

NZPA

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