Two farmer-owned wool companies have taken the first step towards what could become a merger further down the track.
The Primary Wool Co-operative is to take a 5 percent stake in the Wool Equities investment company, which was set up with farmer money from the former Wool Board.
The deal is conditional on Wool Equities shareholders supporting the move at a special meeting at the end of next week.
Wool Equities chairman Cliff Heath said the two companies have been talking for some time about ways of unifying the industry.
"We've looked at a number of options and we've now got a proposition which will see Primary Wool taking a five percent shareholding in Wool Equities Limited, and that's the first step in a journey to bring the two companies together for the greater good of the industry," he said.
"So we're starting to get something that potentially looks like a Fonterra. You know, the dairy industry has got that level of unity, the meat industry are talking about it and this is the first step in the wool industry to achieve that level of unity."
Mr Heath said the deal with the Primary Wool Co-operative would also provide funding and a secure wool supply for the Bruce Woollen Mill in South Otago, which is struggling financially. Wool Equities is the mill's majority shareholder.