KEY POINTS:
Craig Norgate, the man behind the dairy mega-merger that created Fonterra, has turned his sights on the the country's struggling wool industry.
Rural services company PGG Wrightson plans to combine most of its wool business with grower co-operative Wool Grower Holdings.
A new stand alone entity would buy
PGG Wrightson operations including brokering, procurement, warehousing, auction, marketing and exporting for $46 million - $10 million in cash and the rest in a combination of debt and equity.
Wool Grower Holdings would have a minimum 60 per cent ownership and PGG Wrightson would hold up to 40 per cent depending on the involvement of other organisations.
All industry participants were welcome to take part, with the new organisation structured to accommodate them.
"We'd hope that other players in the industry will come and join as well," said PGG Wrightson chairman Norgate. "If they don't ultimately farmers will vote with their feet anyway."
Other parties could be incorporated either as shareholders or by acquisition.
"There's just so many players in the wool industry it's not funny and that's what part of the problem is," Norgate said.
Part of what the new business will be focusing on is rationalisation of processing facilities as a base to improve returns, Norgate said.
The plight and solutions for the wool industry held analogies with the meat industry, he said. "The arrangement we've come to here makes it absolutely clear that you can put farmer ownership and corporate together in a structure that looks after farmers' interests. "If we can't get the meat industry sorted out then you're just not going to have the sheep around."
Meaningful change was also needed in the meat industry, he added. "We've had an awful lot of enquiries from our clients wanting us to get involved and whilst we don't want to make promises we're quietly working behind the scenes to try and bring people together."
The new wool company did not need regulatory approval and the process should be over by the end of the month.
The company would invest in marketing initiatives, sales, distribution and research, while seeking to involve wool growers as suppliers and shareholders.
"You've had 30 years of decline in wool and we'd hope that today's announcement's a bit of a watershed day in terms of the end of the decline and the start of a new beginning."
Wool fibre exports were worth $655.1 million in the year to June, 2007 compared to $688.8 million the previous year.
The wool industry agreement follows discussion between the two parties during the past year and was also signed by Wool Grower Holdings chairman John Perriam.
He said: "As the world's largest handler of crossbred wool, PGG Wrightson makes the perfect partner for Wool Grower Holdings in this market-led initiative. Grower participation and support will be essential to the success of this partnership."
PGG Wrightson's shareholding in New Zealand Merino Company would not be included but niche exporter Bloch and Behrens - purchased by PGG Wrightson this week - was part of the deal.
Wool Grower Holdings was formed by the Wool Industry Network, which is funded by Meat & Wool New Zealand and New Zealand Trade and Enterprise.
Meat & Wool New Zealand chairman Mike Petersen said the agreement was a positive move.
"We've been working hard since the establishment of [the Wool Industry Network] to achieve a strategy that is going to lift returns to New Zealand strong-wool growers, who have been doubly impacted by the poor returns for both sheepmeat and wool," Petersen said.
Federated Farmers Meat & Fibre section chairman Keith Kelly welcomed the new company in principle but wanted to see more detail. Kelly said growers would be supportive of the new agreement if it worked for the benefit of producers of coarser wools.
REFORM PLAN
* New wool entity formed by listed firm PGG Wrightson and co-operative Wool Grower Holdings.
* All wool industry players are welcome to participate with the entity structured to accommodate them.
* The move is an attempt to end 30 years of wool industry decline.
