Godfrey Hirst to challenge High Court ruling rejecting scour merger

Cavalier Wool Holdings not surprised. With special feature audio.

Australian carpet maker Godfrey Hirst has sought leave of the High Court to challenge its June 8 dismissal of an appeal against a merger of New Zealand's wool scouring operations that would give rival Cavalier Corp [NZX: CAV] a monopoly in the domestic industry.

The High Court this month rejected Godfrey Hirst's appeal against the merger, which was approved by the Commerce Commission in November.

The regulator had signed off on a plan for Cavalier Wool Holdings to acquire New Zealand Wool Services International's wool scouring business and assets, with Cavalier Corp, private equity firm Direct Capital and the Accident Compensation Corp owning 55% of the merged business, and WSI parent Lempriere taking a 45% stake.

The backers of the merger successfully argued the real competition for the New Zealand scouring industry was in China, where increasing volumes of greasy, unscoured wool is being exported.

Cavalier Wool Holdings says it is "disappointed but not surprised" by Godfrey Hirst's decision to launch another appeal.

"There is excess wool scouring capacity in New Zealand and this proposal is about consolidating assets and realising efficiencies in order to keep wool processing in the country longer term," the company says.

"We want to avoid what has happened with off-shoring of scouring in Australia and instead create a single, internationally competitive wool processing entity in New Zealand."

Cavalier shares last traded at 67c and have gained 91% in the past 12 months.

(BusinessDesk)