Merger bid floors carpet firm
HUNDREDS of jobs could go in carpet manufacturing if the Commerce Commission approves a merger of major wool scours, Godfrey Hirst says.
Wool manufacturers, exporters and farmers are waiting on the decision regarding a proposed merger of Cavalier Wool Holdings (CWH) with New Zealand Wool Services International (NZWSI).
CWH says a merger will ‘‘rightsize’’ the country’s wool-scouring industry and ensure facilities stay in New Zealand, rather than go to competing wool-trading nations, such as China and Malaysia.
It says Godfrey Hirst, an Australian carpet-maker, had ‘‘run an aggressive campaign’’ against the merger to damage a competitor, New Zealand-owned carpet-maker Cavalier Bremworth.
Cavalier Bremworth is one of CWH’s three shareholders. NZWSI is part of the privately owned, Australian-run Lempriere group.
Godfrey Hirst general manager Tania Pauling said ‘‘all of its business’’ was exposed to the Commerce Commission’s final decision on the scour merger.
A merged Cavalier-NZWSI could refuse to scour Godfrey Hirst’s wool, or double its processing fees, she said. ‘‘We can’t go offshore [for scouring elsewhere] without losing all operations – hundreds of jobs.’’
The company has 419 staff in New Zealand in manufacturing, sales and administration, with offices in Auckland, Wellington and Christchurch.
Pauling said it had been argued that two separate, weaker woolscouring companies had to merge to compete with rival scours in Asia. She said both companies had options, including shutting down underused New Zealand facilities.
She believed CWH and NZWSI wanted to merge, then sell scouring assets to an overseas buyer.
It had cost Godfrey Hirst nearly $1 million to argue its case ‘‘on behalf’’ of the rest of the wool industry. The commission had not allowed Godfrey Hirst to see all the arguments for a merger, while CWH and NZWSI had been sharing information, she said.
Godfrey Hirst’s professional advisers were allowed to see some information but not share it. This meant the company was paying fees ‘‘in the high hundreds of thousands’’ without being able to fully instruct its team.
The commission appeared to have have broken with previous practice and adopted a market definition distinguishing between local users and export customers of scouring services, Pauling said.
Godfrey Hirst once owned scouring facilities but sold them to a CWH joint venture at a time when CWH and NZWSI looked set to continue competing.
Commission chairman Mark Berry said its preliminary view was that the proposed acquisition would substantially lessen competition in the wool-scouring markets and in the small, domestic customer wool-grease market.
It considered there was potential for CWH to raise prices because of the loss of the constraining influence of NZWSI.
‘‘However, at this preliminary stage, the commission is currently satisfied that the public benefits of the acquisition would outweigh the loss of competition,’’ he said.