Takeover of wool company closer
Melbourne wool merchant Lempriere is edging closer to succeeding in its $31 million takeover of New Zealand's largest wool exporter.
The deal safeguards competition in New Zealand's wool scouring industry, and potentially holds further benefits for farmers, chairman of farmer co-operative Wool Equities, Cliff Heath, says.
In an announcement to the market yesterday WSI Holdings, associate company of Lempriere, reported it had secured 87 per cent of shares in New Zealand Wool Services International.
If WSI Holdings secures 90 per cent of the share, it can compulsorily acquire the remaining shares in the company, and would then delist Wool Services International.
WSI Holdings made a formal offer of $31m or 45c a share to Wool Services International shareholders in October, having already secured 75 per cent of Wool Services International shares through pre-bid "lock-up" agreements with the receivers of Allan Hubbard-associated companies, Plum Duff and Woolpak Holdings, Wool Services managing director Michael Dwyer, and some senior employees, for 45 cents a share.
That price means the receivers of Plum Duff and Woolpak Holdings will get $19,974,726 for their 64 per cent stake in Wool Services.
An independent adviser's report by Northington Partners put the full underlying value of Wool Services' shares in a range between 38c and 47c a share. Wool Services shares last traded at 42 cents a share. The offer closes on February 24.
The takeover is subject to approval from the Overseas Investment Office (OIO), which was processing WSI Holdings' application, manager Annelies McClure said.
Commenting on what the takeover will mean for the industry, Heath said he could "only see an upside" to the deal. While he would still have preferred to see Wool Services International in farmer hands, Wool Equities looked at Wool Services but "could never quite get the money on the table".
"This is the next best deal."
Lempriere's takeover of Wool Services International, which owns wool scours in Belfast and Hawke's Bay, meant there would still be competition in the scouring industry, Heath said.
An earlier bid by Cavalier Wool Holdings to gain control of Wool Services' wool scours would have, if successful, given Cavalier a monopoly over the wool scouring industry in New Zealand.
Lempriere has signalled it intends to run Wool Services International as is, which safeguarded competition, Heath said.
Lempriere had been in the wool industry for 150 years and was a family-run business which indicated it was not a "fly-by-night" investor nor speculator and was purchasing WSI as a "serious block in a greater wall of a wool conglomerate", Heath said.
He speculated that the purchase could mean Australian greasy wool being scoured in New Zealand. There was minimal scouring left in Australia, with most Australian wool leaving the country in greasy form for India or China, and over-capacity in the New Zealand scouring industry as sheep numbers and wool levels had dropped.
Lempriere could be interested in a more vertically integrated model because it was in the textile industry, not just the wool trading industry and scouring was a step towards a more vertically integrated model, Heath said.