Wool industry poised for rebuilding venture
A new farmer-led initiative is poised to reclaim the New Zealand wool industry and unite farmers behind a single transparent entity in what is being seen as a critical step to reinvigorate the sector. The newly established New Zealand Wool Investment Company Limited (Wool Co) has set out to raise $40 million in capital to buy New Zealand Wool Services International Ltd.
‘‘We need one company and a simple transparent structure which farmers can be proud of,’’ says Cliff Heath, Wool Co chairman. ‘‘New Zealand wool needs one strong commercial entity that can represent our product in the world market and that has an involvement at every step from the farm gate to the shop floor,’’ Heath says. He strongly believes competition at the scours is vital in order to maintain the processing costs charged to farmers and to ensure the future viability of New Zealand wool. Strategic wool assets, such as the wool scours owned by wool services, could easily be lost from farmer control if Wool Co does not act quickly, he said. Wool Co is seeking to raise $40 million through an offer that will only be available to ‘‘Eligible Persons’’ as defined in the Securities Act 1978 and persons who otherwise fall within section 3(2)(a) of the Securities Act. A 64 percent shareholding in wool services is currently under the control of the receiver of Hubbard associated entities. This shareholding is on the market. Following a successful fundraising, Wool Co will look to negotiate an agreement with the receiver of the 64 percent shareholding in wool services under which the receivers would agree to accept a takeover offer for wool services made by Wool Co. It is intended that such agreement would then be followed by a takeover offer for wool services by Wool Co. If the takeover offer is successful, it is then intended that WEL will, once it has raised sufficient funding to do so and obtained all approvals it requires, purchase the shareholding in wool services acquired by Wool Co resulting in a merger, of the two publicly listed wool companies. WEL has over $300 million of tax losses that transferred after the disestablishment of the former Wool Board.
Kevin Arscott, director of WEL says the Wool Co structure allows us to raise capital required in a timely manner and enables WEL’s tax losses to be preserved. A successful merger of WEL and wool services will minimise the amount of tax to be paid by the new combined entity in the future. Each dollar of tax saved was a further dollar that could be reinvested back into the wool industry which was in the best interests of the growers, said Arscott. ‘‘New Zealand farmers have traditionally received a premium for their wool in the international market due to its quality. A unified approach from growers would help ensure the premium New Zealand wool had earned was maintained, said Heath.
KNITTING TOGETHER: A new initiative hopes to unite farmers who produce wool.