Moves afoot for wool companies to merge

Wool Co. is running two meetings in Hawke's Bay this coming week to outline its proposals to potential investors, as it seeks to raise $40million to buy New Zealand Wool Services International (WSI).

The first meeting is at the Waipukurau Club on Monday at 2.30pm, and the second at the Wairoa Golf Club on Tuesday at 10am.

A 64 per cent shareholding in WSI is currently under control of the receiver of Hubbard-associated entities. That shareholding is on the market. Following a successful fundraising, Wool Co. will look to negotiate an agreement with the receiver of the 64 per cent shareholding in WSI. It is intended that such an agreement would then be followed by a takeover offer for WSI by Wool Co.

If the takeover offer is successful, it is then intended Wool Equities (WEL) will, once it has raised sufficient funding to do so and obtained all approvals it requires, buy the shareholding in WSI acquired by Wool Co., resulting in a merger of two publicly listed wool companies.

Cliff Heath, chairman of Wool Co. said after consultation with farmer groups and rural bankers the minimum investment had been lowered to $9500.

"We have been overwhelmed by the support we have received from farmers on the strategy but many of them were saying they would like to invest but the minimum quantum was too high," he said. "While many farmers meet the eligible persons criteria under the terms of the offer, given they have had a number of tough years on the farm, they are telling us that they wish to err on the side of caution with respect to their off-farm investments.

"This is a farmer-led initiative and we need farmers to come in behind the opportunity financially to ensure its success."

Wool Co. is a new entity, jointly owned by WEL and Christchurch-based investment bank Ocean Partners.

Wool Equities was formed after the disestablishment of the New Zealand Wool Board in 2003 and has more than 9500 farmer shareholders.

In July it announced that it had funding for a rival bid to Cavalier Wool Holdings' offer of $40million for the assets of WSI.

The High Court has temporarily delayed any sale of WSI to Cavalier until there is an outcome to a challenge from transtasman carpet maker Godfrey Hirst to the Commerce Commission's approval of Cavalier's offer.