22 Oct 2014

Second bid to merge wool scourers

1:48 pm on 22 October 2014

New Zealand's two wool scour operators are seeking Commerce Commission approval to merge their businesses, resurrecting a move that failed to fire three years ago.

Cavalier Wool Holdings and the country's biggest wool exporter, New Zealand Wool Services International (WSI), have signed an agreement for the merger.

Cavalier is the country's largest scouring operator with plants in Napier and Timaru cleaning wool for exporters on a commission basis. Wool Services runs two scours at Napier and Christchurch.

In 2011, Cavalier got clearance from the commission to acquire the assets of Wool Services International with the aim of merging their scouring operations - a move it said was necessary to keep them going in the face of competition from China.

Cavalier ran into strong opposition, not only from WSI and other wool exproters, but its carpet making rival Godfrey Hirst, which objected to the scouring monopoly that would be created and appealed to the High Court

The court backed the Commerce Commission decision, but Cavalier didn't proceed.

However, it seems circumstances have changed, with the just announced agreement between Cavalier and WSI to merge their scouring assets.

A Cavalier director, Ross George, describes it as an opportunity to bring the scouring industry into line with current wool volumes and ensure it can continue in New Zealand.

"The driving factor behind this merger is exactly the same as the drivers behind the mergers and acquisitions over the last 20 years or so, and that is, that the scouring industry has had to adapt to the reduced volumes of wool farmers have been growing.

He said the move is also a response to the competition coming from China's increasingly efficient scourers.

Mr George said the plan is to consolidate scouring into two expanded sites at Napier and Timaru. That will mean the closure of WSI's Christchurch scour and one of the scours in Napier.

Under the agreement, Wool Services International would separate its wool trading and scouring operations and, like other exporters, would get its wool cleaned under a commission arrangement with Cavalier.

Get the RNZ app

for ad-free news and current affairs