Cavalier Wool Holdings has rejected a suggestion that wool prices could drop by up to $2 a kg if it buys the wool-scouring assets of New Zealand Wool Services International.
The High Court recently dismissed an appeal by Godfrey Hirst over the Commerce Commission's decision to grant authorisation to CWH to make an offer for the company's scouring assets.
CWH has released a series of questions and answers in response to comments that have been reported, and clarifying its position regarding the proposed merger.
In a letter to farmers in October, Cliff Heath, who is chairman of both Wool Equities and Wool Co, said the monopoly created and the closure of WSI could cause a reduction in price of up to $2 per kg of all wool sold.
CWH said that was not true and it challenged those "misleading claims". CWH was merely an intermediary processor which did not own or trade wool. It had no influence "whatsoever" on the price at which wool was bought and sold, other than the scouring fee.
That position was clearly supported by the High Court in its decision to dismiss the appeal and the claim that wool prices would decline at all, CWH said.
It believed the economies of scale gained through the merger would result in more competitive scouring tariffs and ultimately wool growers would be better off.
Now the High Court appeal was over, the company could focus on ensuring the industry understood what it was trying to achieve with the merger and how it benefited wool growers, chief executive Nigel Hales said.
If it was unable to achieve the efficiencies arising from the acquisition, the domestic industry could not be expected to maintain prices for scouring at levels which would be competitive with China, and thereby avoid the loss of the scouring industry off-shore, as had occurred in the United Kingdom and Australia.
A "number" of interested parties had made inquiries and significant work had already been done behind the scenes to ensure the wool-trading business of WSI would be sold as a going concernCWH had funding pre-arranged to operate that part of the business, through the transition period, and was confident there would be no disruption to New Zealand wool exports and sales.
Wool Services International has previously said any offer would need to be subject to shareholder approval.
