The newly-established New Zealand Wool Investment Company - a joint venture between Wool Equities Ltd and Christchurch-based investment bank Ocean Partners - is seeking to raise $40 million to buy New Zealand Wool Services International (WSI).
In July, Wool Equities Ltd announced it had secured "significant funding" to make a rival bid for WSI. That announcement followed the decision by the High Court to place a temporary halt on Cavalier Wool Holdings' proposed purchase of WSI to allow an appeal to be heard.
The Commerce Commission granted authorisation to Cavalier Wool Holdings to make an offer for WSI's wool-scouring assets.
The company had made a $40 million conditional offer.
The commission's decision was appealed by New Zealand's largest carpet manufacturer, Godfrey Hirst, which said it struggled to see how a regulatory body could allow for a monopoly in a key industry.
In a statement yesterday, New Zealand Wool Investment Company (Wool Co) chairman Cliff Heath said one company was needed and a "simple transparent structure" which farmers could be proud of.
"New Zealand wool needs one strong commercial entity that can represent our product in the world market and that has an involvement at every step from the farm gate to the shop floor." Competition at the scours was vital in order to maintain the processing costs charged to farmers and to ensure the future viability of New Zealand wool.
"Strategic wool assets, such as the wool scours owned by WSI, could easily be lost from farmer control if we don't act quickly," he said.
Wool Co is seeking to raise $40 million through an offer that will be available only to "eligible persons", as defined in the Securities Act 1978 and persons who otherwise fall within section 3(2)(a) of the Securities Act.
A 64% shareholding in WSI is at present under the 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% shareholding in WSI under which the receivers would agree to accept a takeover offer for WSI made by Wool Co.
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 that WEL will, once it has raised sufficient funding to do so and obtained all approvals it requires, purchase the shareholding in WSI acquired by Wool Co - resulting in a merger of the two publicly listed wool companies, he said.
The directors of Wool Co are listed as Mr Heath, Tim Howe, Sarah Ott, Kevin Arscott and Anne Munro.
In a recent statement, WSI chairman Derek Kirke said the WEL proposal was not a WSI initiative and the board of WSI learnt about it at the same time as the public.
WEL did not have any agreement with the receivers who held 64% of the company's shares for the purchase of that "key stakeholding". A full takeover of the company would require 90% shareholder support, Mr Kirke said.
WSI had received pressure from a number of its shareholders and other investors who were keen to avoid a Cavalier Wool Holdings wool scour monopoly to proceed with a WSI capital raising. That possibility was under consideration, he said.
