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2012 – the year in farming
Relief as Lempriere looks set to keep scours in New Zealand by Hugh de Lacy Relief that the company’s state-of-the-art wool-scouring technology is not going to China has greeted the takeover of Wool Services International (WSI) by international wooltrader Lempriere, even as two other local industry players head in diametrically opposite directions.
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The 150-year-old Melbourne-based Lempriere is shelling out $31 million, or 45 cents a share, to acquire 64% of WSI from the receivers of the late Allan Hubbard’s collapsed South Canterbury Finance. Meanwhile, Wools of New Zealand (WNZ) was confident it would raise enough money to float its branding and marketing initiative, and publicly listed Wool Equities Ltd (WEL) pushed ahead with its purchase of plant to develop diversified woollen product lines. WSI shares last traded on the New Zealand Stock Exchange at 37c before they were removed from the board in the wake of the Hubbard collapse. Lempriere already held 11% of WSI, and now has 75% ownership through the lock-up agreement with the receivers, while WSI management staff own a further 11%. The WSI board, chaired by Derek Kirke of Wanaka, welcomed the deal which has taken nearly two years to finalise.
The receiver’s offering of the shares formerly held by Hubbard’s Plum Duff and Woolpak Holdings companies triggered fears that a purchase by Chinese interests would see WSI’s two scours packed up and shifted to China, which has become the centre of global wool processing. These fears had hardly subsided when the owner of the other two wool-scours in New Zealand, Cavalier Carpets, went to the Commerce Commission seeking permission to buy the WSI scours, apparently to close them down, leaving itself with a monopoly. In an unsuccessfully appealed decision that continues to leave farmers scratching their heads, the commission, the guardian of competition in New Zealand industry, gave its support for the proposed monopoly. In the end the Hubbard receivers were able to offload WSI to Lempriere, which has brought a sigh of relief from the industry. Mark Shadbolt of Banks Peninsula, the chairman of the trust that bought the WNZ brands from PGG Wrightson for $1.8 million in November last year, welcomed Lempriere’s WSI purchase, saying wool producers didn’t need to own scours because they are ‘just a service provider’. “It’s very hard to add value [to wool at the scour], but it’s
very important that we support the scour industry because it’s where we can add integrity [to the wool shipment], and we know exactly what’s happening to it,” Shadbolt said. “ I t ’s good there’s competition.”
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It was also good that the lanoline collected during the scouring process would be marketed as a New Zealand rather than an overseas product. At the time he spoke to Canterbury Farming, Shadbolt was awaiting the outcome of the WNZ float to farmers which was seeking $10 million to capitalise its existing branding and marketing business, but which the prospectus allowed to proceed with just $5m. Shadbolt said he doubted the $10m figure would be reached but said he and fellow trustee Phil Gruscott remained committed to and confident of getting the concept up and running. “There have been too many unsuccessful attempts,” he said. “Every time there is one and it doesn’t start, growers become more complacent.” The WNZ purchase from PGG Wrightson was made with borrowed money, serviced in the interim by Progressive Meats, the Wool Research Organisation of New Zealand (WRONZ), and by Shadbolt and Gruscott. The capitalisation would repay the debt, leaving WNZ debt-free, Shadbolt said.
Cliff Heath of Masterton, the chairman of publicly listed Wool Equities Ltd (WEL), one of the unsuccessful bidders for the WSI shares, also welcomed Lempriere’s success, though he described it as ‘the secondbest option’. “It would have been good if [the scours] had ended up in farmers’ hands,” but it was generally good for the industry, Heath told Canterbury Farming. WEL tried to raise enough cash from its 9500 woolgrower shareholders to fund the purchase of the Hubbard shares but failed, and the attempt doubled its losses for the year to June to $1.7m. WEL was the repository of the last few millions of the
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defunct Wool Board’s money that weren’t blown by the former Auckland directors of the company on a risky hightech play in the United States. With what’s left over, WEL has purchased the old Bruce Woollen Mill in Milton, Otago, and a weaving plant in Palmerston North. WNZ and WEL represent opposite poles in the thinking on how to rejuvenate the struggling crossbred wool industry, with WNZ seeing the answer lying in connecting farmers directly with the purchasers of their wool through branding and marketing exercises, and WEL plumping for creating productive capacity with which to target specific markets.