Wool conference eyes scouring buyout

The spectre of New Zealand losing its wool-scouring industry to China is the motivation behind the Cavalier Authorisation Conference.
It has been called by the nation's business watchdog, the Commerce Commission, to make a final determination on whether to allow Cavalier Wool Holdings to acquire 100 per cent of New Zealand Wool Services International Limited's (WSI) wool-scouring business.
In a draft determination on April 13, the Commission said it would be willing to hand carpet maker Cavalier Wool Holdings a virtual monopoly on wool-scouring services by allowing it to buy up to 100 per cent of publicly listed WSI.
Cavalier was half-owned by Cavalier Corporation and 25 per cent each by Direct Capital and ACC.
Cavalier applied for clearance from the commission after it was announced a combined two-thirds stake in WSI was on the market following the receivership of two Allan Hubbard-related companies - Plum Duff and Woolpak.
Cavalier had indicated WSI's scouring plants from Kaputone, north of Christchurch, would move to Timaru and the Whakatu operation to Cavalier's plant at Awatoto. Cavalier planned to mothball scour lines at its own Clive and Timaru plants.
Commerce Commission chairman, Dr Mark Berry said in the draft that benefits to the public would outweigh the loss of competition.
"The rationalisation is likely to lead to lower production and administration costs, the freeing up of industrial sites, and lower ongoing capital expenditure requirements in the future," he said.
Cavalier chief operating officer Colin McKenzie said the acquisition was essential to making structural changes necessary to restore profitability to the strong wool sector.
The commission was worried the industry would go the way of Australia's, with most of its wool clip shipped unscoured to China to be used for textiles.
In a draft determination favouring the deal, Mr Berry said the risk of Cavalier increasing charges for wool scouring would be offset by Chinese competition and the potential for new wool scours in New Zealand.
A letter was tabled at the Cavalier Authorisation Conference in Wellington last week from Wen Qingnan, managing director of Tianyu Wool Industry Ltd, which has the largest scouring factory in the world.
He said his company did not plan to scour New Zealand wool because its machines were set for the finer Australian Merino wool and only 2 per cent grease could be extracted from crossbred wool compared to with up to 6 per cent for Merino.
"Thus it is not economical for us to scour New Zealand wool, therefore, we are not a rival, nor a competitor of the New Zealand wool-scouring industry."
The conference was extended until Friday. The final decision was expected on or before May 31.