Claims that the potential sale of New Zealand Wool Services International (WSI) will lower the price of wool and harm the industry have been rejected by the High Court in Wellington.
Carpet maker Godfrey Hirst appealed the Commerce Commission's decision to allow the possible sale of WSI to Cavalier Wool Holdings, which would result in a wool scouring monopoly.
More than 60 per cent of WSI is up for grabs as a result of the receivership of two companies associated with the late financier Allan Hubbard. The 83-year old died last month following a car crash near Oamaru.
Cavalier plans to expand its Hawke's Bay operation and will offer jobs to WSI workers, should the takeover eventuate.
It has said it will relocate WSI's scouring plants from Kaputone to Timaru and from Whakatu to Cavalier's nearby plant at Awatoto.
Cavalier would also mothball scour lines at its Clive and Timaru plants.
The judgement said that because of overseas competition and industry over-capacity the acquisition was justified.
"We conclude there is such a benefit to the public that the proposed acquisition should be authorised. If we were to stand back from this analysis there is nothing that causes us concern about this conclusion," it said.
Godfrey Hirst's counsel had called for the High Court to make a "value judgment" on whether a monopoly was good for the nation.
Woollen carpet maker Godfrey Hirst's failure to have the court reverse the Commerce Commission's decision was a reason for the company possibly pulling out of New Zealand, threatening 120 jobs in the Dannevirke branch of Canterbury Spinners.
A spokesman for the company said the failure of the court to protect "NZ Inc" was disappointing, with the possibility of "monopoly prices" forcing New Zealand manufacturers overseas.
"If you are going to put one part of your business overseas why not put all of your business over there?" he said.
Godfrey Hirst was still surveying its options, he said.
"Nothing is going to happen in the short term, and nothing may ever happen."
Wool Equities Ltd, which seeks a grower-cooperative ownership structure for the wool industry, has renewed calls for farmers to send in cheques to contribute to its bid to buy New Zealand Wool Services International.
It seeks to buy WSI in a co-operative venture, as is common in the dairy industry.
Wool Equities chairman Cliff Heath said: "If everyone who says they will support us sends in a cheque we will be in a good position."
Up to $40 million is sought from farmers. There were other parties interested in funding the bid if grower contributions fell short, Mr Heath said
Cavalier has said it would fund its bid for WSI internally.
WSI chairman Derek Kirke said he understood that so far there were no formal offers to buy his company, but many had called for WSI to buy its own shares.
"When the time is right we will go to the market with our own market raise," he said.
With the increase in the price of wool and low building activity the carpet making industry is under pressure. Last month Cavalier Spinners announced it would shed 22 jobs nationwide, including 10 in Napier.
It was also announced that Norman Ellison Carpets in Auckland would shed 20 jobs.
Godfrey Hirst closed Canterbury Spinners in March with the loss of 220 jobs, after it sustained heavy earthquake damage.
Cavalier Corporation has advised shareholders that sales volume of broadloom carpet and carpet tiles for the first quarter to 30 September 2011 are down around 20 per cent on the previous year.