The High Court has dismissed an appeal by Godfrey Hirst over the Commerce Commission's decision to grant authorisation to Cavalier Wool Holdings to make an offer for New Zealand Wool Services International's wool scouring assets.
CWH chief executive Nigel Hales welcomed the decision, saying it paved the way for the company to negotiate the sale and purchase of the assets of the WSI business "with confidence".
However, WSI chairman Derek Kirke said yesterday CWH had no current offer before WSI and any offer would need to be subject to shareholder approval.
"If an offer is received from Cavalier, then the board would need to consider that offer and decide whether it is appropriate to be placed before shareholders for consideration. It is business as usual for WSI until this possibility develops." Mr Kirke told the Otago Daily Times he was surprised by the decision and believed the wool industry was both concerned and disappointed.
The New Zealand Herald reported Godfrey Hirst would be looking at relocating some of its manufacturing operations offshore, following the ruling.
General manager Tania Pauling said the judgement was disappointing for the New Zealand wool industry and all end users of New Zealand strong wool.
It would create a monopoly in a key sector which potentially jeopardised the longevity of the New Zealand wool industry.
A 64% shareholding in WSI is at present under the control of the receiver of Hubbard associated entities. In June, the Commerce Commission granted the authorisation to CWH. The company had made a $40 million conditional offer.
The commission's decision was then appealed by Godfrey Hirst, New Zealand's largest carpet manufacturer.
Then a joint venture between Wool Equities Ltd and boutique investment bank Ocean Partners was announced, with the newly established Wool Co hoping to raise $40 million to buy WSI.
Last week, WSI confirmed it was preparing to raise capital but would not embark on that until the Cavalier situation was resolved. Yesterday, Mr Kirke said the capital-raising was still an option.
Mr Hales believed the merger of the wool scouring businesses was good, and part of the structural changes that the industry required to "gain efficiencies, continuous improvement and remain competitive with our international competitors".
CWH would now continue to seek to reach an agreement with WSI for an agreement that was "mutually positive" and a good outcome for all stakeholders.
It had already undertaken seven successful scour mergers with the aim of making structural improvements in the wool sector.
"This merger will further strengthen the case for retaining a scouring industry in New Zealand.
Greater scale means we can process more efficiently, at lower cost to farmers, and this is crucial to the survival of the New Zealand scouring industry as exporters have the option to bypass the New Zealand industry and export greasy wool to China." If successful, CWH would continue to operate as a commission wool-scourer post-merger but planned to sell the wool trading division of WSI.
"We will also continue to promote the concept of a co-ordinated 'Super Store' logistics business which through reducing transportation and storage costs will mean higher returns for wool growers."
To gain efficiencies from the merged scouring business, WSI wool scours would need to be relocated, creating new employment opportunities at Canterbury Woolscourers and Hawkes Bay Wool Scourers. Relocation packages would be offered to South Island staff wanting to relocate from Christchurch to Timaru, he said.
