ComCom approves Cavalier Wool's acquisition of NZWI's wool scouring unit

Friday 13th November 2015

The Commerce Commission approved a plan for Cavalier Wool Holdings to acquire New Zealand Wool Services International's wool scouring business and assets.

The decision affirms the antitrust regulator's draft determinations in March and October where it said the public benefits would outweigh the loss of competition. The number of wool scouring operators in New Zealand has been reducing amid a declining wool clip and increasing exports of greasy wool to China, the Wellington-based regulator said in a statement.

“As noted in our earlier draft determinations, this acquisition is likely to substantially lessen competition", Commission chair Mark Berry said in the statement. "Cavalier will essentially have a monopoly on the supply of wool scouring services and the supply of wool grease, and will be able to raise its prices when the merger is completed.

“However, our analysis has shown that there are public benefits to New Zealand from this acquisition proceeding. We expect that the rationalisation of the wool scouring industry is likely to lead to lower administration and production costs, the freeing up of industrial sites, and lower ongoing capital expenditure requirements in the future.”

Australian company Godfrey Hirst, which competes with Cavalier Wool Holdings group member Cavalier Corp and extended its dominance of the Australasian carpet market with the acquisition of the Feltex assets, asked the High Court yesterday to temporarily prevent Cavalier completing the merger so it could file a formal appeal against the determination, the commission said.

Cavalier Wool Holdings is New Zealand's largest wool scouring business and the deal will see Cavalier Corp shrink its ownership from 50 percent to 27.5 percent in the scouring business.

The merged scouring business will be 55 percent owned by Cavalier, private equity firm Direct Capital and the government's Accident Compensation Corp, with WSI parent Lempriere taking a 45 percent stake. After the merger, WSI would separate out its scouring business to become a stand-alone wool exporter as a commission customer of Cavalier Wool Holdings.

BusinessDesk.co.nz

Comments from our readers

No comments yet