Woolly merger approved despite creating monopoly

Cavalier's Hawke's Bay Wool Scourers, which processes about a million kilos of wool a week, is set to merge with the operations of competitor New Zealand Wool Services International. Photo / File

Today is the closing date for submissions on the Commerce Commission's draft determination that approves the merger of Cavalier Wool Holdings and New Zealand Wool Services International's (NZWSI) operations.

If the merger goes ahead Hawke's Bay's wool scouring will likely be centred at one site.

About half of the firms' combined staff of 160 are in Hawke's Bay. Cavalier is New Zealand's largest scouring operator based in Clive, Napier, and Timaru.

Australia-owned NZWSI operates wool scours in Napier and Christchurch and is New Zealand's largest exporter of wool. The merger would ultimately give Cavalier an industry monopoly but the anti-trust regulator's draft determination said public benefits outweighed any loss of competition.

The commission said there was potential for Cavalier Wool Holdings to raise prices after the acquisition because of the loss of the constraining influence of New Zealand Wool Services International.

"However, as with our previous decision in 2011, we expect that the rationalisation of the wool scouring industry is likely to lead to lower production and administration costs, the freeing up of industrial sites, and lower ongoing capital expenditure requirements in the future," commission chairman Mark Berry said.

In 2011 the commission approved Cavalier's move to merge but carpet maker Godfrey Hirst appealed the decision to the High Court.