11 Jun 2011

Cavalier cleared to buy Wool Services International

11:03 am on 11 June 2011

Wool processor and carpet maker Cavalier has been given the go-ahead to buy the scouring operators of its rival, the country's largest wool exporter Wool Services International.

The Commerce Commission has acknowledged the purchase will reduce competition and may result in higher prices but reckons the benefits will outweigh the detriments.

It found there are likely to be considerable production and administration savings from the consolidation, including the freeing up of industrial sites, lower ongoing capital expenditure and improvements to wool handling.

Cavalier Wool, which is half-owned by Cavalier Carpets, welcomed the decision, saying rationalisation is needed to compete with Chinese rivals.

Chief executive Nigel Hale says it is the first step in the firm's plans to acquire all the shares or assets of Wool Services International (WSI). The company has made a $40 million offer for WSI.

Mr Hales says Cavalier will merge WSI's scouring operations with its sites at Napier and Timaru and sell off its wool trading arm as a going concern.

Several offers in frame

Most of WSI's shares have been on the market since shareholders Plum Duff and Woolpak Holdings were put into receivership.

WSI chairman Derek Kirke says Cavalier's $40 million offer is just one of a number it is considering, and in the meantime it is business as usual.

Mr Kirke says the board needs to take time now to seriously look at the offers from Cavalier and others. He says Cavalier's is different in that it is for the firm's assets and liabilities rather than the shares, and it will be complex for the board to go through.

Godfrey Hirst to appeal

Meanwhile, the country's largest carpet manufacturer, Godfrey Hirst, says it will appeal against the Commerce Comission's decision.

Its general manager, Tania Pauling, says it is extremely disappointed that the commission has sanctioned a monopoly in the nation's wool souring market.

She says it will have implications not only for direct users of scouring but also for the woolgrowers, manufacturers and end users of strong wool products.