The company this week lost a bid to overturn plans by rival Cavalier Corp. The Court of Appeal dismissed Godfrey Hirst’s appeal against earlier decisions by the Commerce Commission and the High Court to allow the merger of the wool scouring operations of New Zealand Wool Services International and Cavalier’s 50%-owned Cavalier Wool Holdings. Direct Capital and ACC are the other shareholders in Cavalier Wool Holdings.
The regulator allowed the merger of the wool scouring plants, creating a monopoly in the supply of wool scouring services and the supply of wool grease on the trade-off there was a broader public benefit in fending off competition from cheaper foreign rivals, such as scours in China.
Godfrey Hirst said in a statement yesterday it had incurred significant expense during a two-year period trying to overturn a "questionable" Commission Commission decision.
While Godfrey Hirst had considered appealing the decision to the Supreme Court, New Zealand’s courts so far had been willing to endorse the regulator’s seeming lack of concern at allowing a monopoly to occur in a key primary industry where much of the so-called benefits would flow to off-shore Chinese owners and most of the detriments would be felt by New Zealand farmers, the company said.
The commission justified the merger on the basis that creating a monopoly might enable the local industry to fend off competition from cheaper foreign rivals.
The irony was the new monopoly was already controlled from overseas. NZ Wool Services International, which would hold the largest stake, was owned by Chinese interests. NZ Wool Services International also had a contractual right to purchase the shares of Direct Capital and ACC and the option of requiring the minority shareholder Cavalier Wool Holdings to sell.
"The end result is the approval of this merger has resulted in, rather than prevented, New Zealand’s only full-service scouring entity being controlled by Chinese interests.
"This is a major blow to the wool industry and to competition generally in New Zealand."
Cavalier said it welcomed the decision by the Court of Appeal. The decision further supported the proposal to consolidate scouring and capture the efficiencies necessary to keep wool processing in New Zealand in the long term.
