Com Com ruling may drive manufacturer offshore
Carpet maker Godfrey Hirst is threatening to relocate some of its manufacturing offshore after losing an appeal against Commerce Commission clearance of rival Cavalier to acquire specific assets of Wool Services International.
The High Court judgment paves the way for Cavalier Wool Holdings to launch a $40 million bid for WSI’s assets and effectively create a monopoly over the country’s wool scouring industry.
While WSI is not welcoming Cavalier’s approach, a deal may come down to what is agreeable to the receivers of WSI’s major shareholders, Plum Duff and Woolpak, which own a combined 64% of WSI.
The judgment will also be of interest to listed company Wool Equities, which is keen on mounting a rival bid for WSI through its newly established New Zealand Wool Investment Company (Woolco) and is in the process of raising capital.
WSI is one of New Zealand's leading wool exporters and the company also has strategic wool scouring operations.
Godfrey Hirst is the country’s largest carpet manufacturer.
In a statement released today the company expressed disappointment at the judgment and said it may force the company to relocate some manufacturing offshore.
“This judgement is very disappointing for the New Zealand wool industry and, in turn for all end users of New Zealand strong wool,” Godfrey Hirst general manager Tania Pauling said.
“It creates a monopoly in a key sector which potentially jeopardises the longevity of the New Zealand wool industry. We intend reviewing the judgement over the coming days and will be considering our options going forward – including the possibility of relocating some of our manufacturing assets offshore.”
Cavalier shares have taken a battering in recent months, with selling pressure accentuated after the company this week slashed its forecast earnings by as much as half from the previous year's profit.
Cavalier shares closed today at $2.21, having hit a high of $3.90 in May.
Duncan Bridgeman
Thu, 24 Nov 2011
Thu, 24 Nov 2011
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Com Com ruling may drive manufacturer offshore
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