Friday, 13 November 2015 16:30

Cavalier approved to buy WSI wool scouring business

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The Commerce Commission has approved Cavalier Wool Holdings' (Cavalier) application to acquire NZ Wool Services International's (NZWSI) wool scouring business and assets.

Competitor Godfrey Hirst has asked the High Court to temporarily prevent Cavalier completing the merger, so that it could file a formal appeal against the determination.

Commerce Commission chair Dr Mark Berry says the commission has considered and tested all the submissions and evidence presented to it since the application was lodged in October 2014 and was satisfied the acquisition should be permitted.

"The number of wool scouring operators in New Zealand has been reducing for some time in the face of a declining wool clip and increasing greasy wool exports to China," says Berry.

"Many in the industry commented to us that further rationalisation, as this application represents, is inevitable.

"As noted in our earlier draft determinations, this acquisition is likely to substantially lessen competition. 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."

Berry says the commission had also taken into account that the declining wool clip is causing a loss of scale and the threat of greasy exports is increasing.

As an appeal is expected, the Commission will not be able to provide further comment at this time.

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