Allied Farmers is selling its wool business to The Wool Company. Photo / Sarah Ivey
Consolidation in the wool industry is growing with listed rural services and finance company Allied Farmers selling its wool business to The Wool Company.
Allied Farmers chairman John Loughlin said the company was pleased to participate as an early mover in the consolidation of the wool industry and
contribute to an initiative to grow value in the sector.
Progress was desperately needed in the wool industry, Loughlin said.
"We have to find ways to get better wool returns and we didn't see that we were going to achieve that on our own and that it was better to facilitate a sensible outcome on behalf of farmers," he said.
The wool consolidation comes in the same week PGG Wrightson agreed to buy 50 per cent of meat processor Silver Fern Farms for $220 million in a deal promoted as a platform for further rationalisation and integration of the meat industry.
Allied Farmers' wool business included about 20 people, acquired wool and sold it on behalf of farmers through auctions for a commission.
The business accounted for less than 5 per cent of the national wool clip and the value of the sale was not disclosed.
"It's not a particularly large part of Allied Farmers but it's a very useful add-on to the business that Wool Company is acquiring from [PGG Wrightson]," Loughlin said.
"We didn't want to frustrate progress in the industry," he said.
PGG Wrightson in May agreed to combine most of its wool business with prospective co-operative Wool Grower Holdings in the entity The Wool Company.
The company was expected to begin operations on July 11 and would buy PGG Wrightson's operations for $46 million - $10 million in cash and the rest in a combination of debt and equity.
PGG Wrightson would hold up to a 40 per cent stake, depending on the participation by other organisations, while Wool Grower Holdings would own a minimum of 60 per cent.
"We see this acquisition as being ... entirely complementary to the PGG Wrightson transaction," Wool Grower Holdings chairman James Aitken said. "We are delighted to have Allied Farmers Wool on board."
Allied Farmers' share price closed steady at $1.30 yesterday.
