Jobs lost in wool scour merger

But industry would remain in NZ, which is worth loss of competition ComCom says

Jobs will be lost with the upcoming consolidation of North Island wool scouring operation to a single site. The Court of Appeal has dismissed Godfrey Hirst’s appeal against earlier decisions by the Commerce Commission and High Court to allow the merger of NZ Wool Services International (WSI) and Cavalier Corp’s 50 per cent-owned Cavalier Wool Holdings’ (CWH) scouring operations.

About half of the firms’ combined staff of about 150 are in Hawke’s Bay, where all North Island wool scouring would be based following the merger.

Cavalier is NZ’s largest scouring operator based in Clive, Napier (Awatoto), and Timaru.

Australia-owned WSI operates wool scours in Whakatu and Christchurch.

The merger has been on hold for five years following legal moves by Australia-owned carpet maker Godfrey Hirst.

The Commerce Commission said the public benefits of retaining the industry in New Zealand would outweigh the loss of competition. The merger/acquisition would create a national wool-scouring monopoly but, with the industry facing tough competition from China, the commission said the acquisition would retain the industry in New Zealand.

Alston said the timing of the merger and the number of jobs lost was yet to be finalised.

The merged entity will be 55 per cent owned by Cavalier Corporation, NZ private equity firm Direct Capital and the ACC, with WSI parent Lempriere Australia taking a 45 per cent stake. Lempriere is majorityowned by a Chinese-based textile group which has an option to increase its share of the merged entity to 72.5 per cent by buying out ACC and Direct Capital.

“This is about protecting the industry,” said Cavalier Corporation chief executive Paul Alston.

Australia has no wool-scouring industry, with the nation’s clip processed in China.

He said while Cavalier’s wool scour was profitable it faced increasing pressure and the merger would “protect its long-term future”.

Godfrey Hirst has said prices for scouring services could jump as much as 25 per cent following the merger.

In a statement it said it had considered appealing the latest decision to the Supreme Court but NZ’s courts were “willing to endorse the regulator’s seeming lack of concern at allowing a monopoly to occur in a key primary industry where much of the so-called public benefits will flow to offshore Chinese owners and most of the detriments will be felt by New Zealand farmers”.

The Awatoto wool scour is across the road from Cavalier Corp’s spinning plant.