Loss-making textiles research company Canesis Network is a possible target for AgResearch as it looks to rationalise wool sector research.
A drop in farmer levies under wool sector restructuring, and lower income from other research funding and levy sources, has hit Canesis.
The Lincoln-based company is owned by NZAX-listed WoolEquities (74.9 per cent) and Wool Research Organisation of NZ.
AgResearch and Wool Equities stressed that it was still "early days" and would not put a price on the sale.
Wool Equities chief executive Mark O'Grady said his company saw potential benefits in selling following an approach from AgResearch.
"The benefit to us is that it would enable us then to concentrate our resources on commercialising some of the extraordinary products that we've got in a couple of our other companies."
Wool Equities reported a $4.4 million loss for the last half of last year. Of that, $1.95 million was attributed to Canesis.
But Canesis was still described in its half-year report as a "world-class science institution". It had undergone significant restructuring, and the report indicated financial issues would be resolved by the end of this month.
AgResearch commercial general manager Ian Boddy said he was aware of financial problems at Canesis.
However, there were potential benefits in merging the Canesis wool research operations with those of AgResearch to bring "all wool research, from animal right through to end product, under the one roof".
AgResearch worked on sheep and wool production, and Canesis looked at what was done once wool was off the sheep's back.
"The hope is that just those synergies and benefits we see of having the two together would be able to see it [Canesis] come right."
