11 Jul 2011

Farmer company potential bidder for WSI

1:49 pm on 11 July 2011

A farmer-owned wool sector investment company has shown its hand as a potential bidder for exporter and scour operator New Zealand Wool Services International (WSI).

Wool Equities (WEL) has confirmed it's in the hunt for some or all of Wool Services International's shares and will be seeking support from its farmer shareholders to put in a bid.

WEL chairperson Cliff Heath says it's been given a tight window of opportunity to make its move after the High Court placed a temporary halt on the sale of WSI assets to the country's other scour operator, Cavalier Wool Holdings.

Cavalier has Commerce Commission clearance to acquire WSI, so it can merge both scouring services, creating a monopoly.

Wool processor and carpet maker Godfrey Hirst is challenging the Commission's decision and has been granted a stay against Cavalier until its appeal is heard next month.

Mr Heath says Wool Equities' its farmer shareholders are also strongly opposed to a wool scouring monopoly and are keen to see Wool Services, which is also the country's biggest wool exporter, brought back into farmer control.

He says farmers, through Wool Equities, will retain some ability to influence what happens with the scours.

Mr Cliff says the Commerce Commission in its initial findings made it clear that if there was to be an increase in the scouring price as a consequence of that monopoly, it was confident that increase in cost would be borne by farmers rather than taken off the price of wool.

He says that's totally unacceptable to farmers.

Mr Heath says Wool Equities will need to hold a special meeting to get farmers' approval to raise the money to buy Wool Services' shares, including the 64% majority shareholding held by two companies that are in receivership.

Those shares have already been on the market and the receivers have been talking to a number of potential buyers.

The High Court halt on Cavalier acquiring WSI's assets does not stop it, or the Wool Services board, continuing negotiations with other potential buyers.

However Cavalier Wool Holdings chief executive Nigel Hales says the court decision means Cavalier can't finalise a transaction for Wool Services International, which could unfairly disadvantage it.