Wool offer hangs by a thread

Wool Partners Co-operative wants farmers to unite into a single marketing and distribution organisation, something wool exporters oppose. Photo / APN

An offer to wool farmers to join an organisation that says it can offer them a better and more stable future hangs in the balance, as acceptances have fallen short of the required target just days before the close.

Wool Partners Co-operative (WPC) says there will be no further extensions to its offer to buy shares in the co-op after Wednesday.

It published an open letter to New Zealand strongwool (carpet wool) growers this week urging them to accept the deal.

The offer has been extended twice as debate rages over an initiative billed as the way forward for the struggling wool industry.

At December 31, WPC had received just $35 million worth of acceptances from growers, $20 million short of the minimum $55 million it must achieve for the capital raising to go ahead.

"We may never get the opportunity again," said deputy chairman Mark Shadbolt, who has been on a last-minute roadshow to persuade farmers.

"If we lose this opportunity there's a real fear the industry, and I include fine wool in this, could be lost to overseas and corporate ownership forever."

The theory is that if farmers unite into a single marketing and distribution organisation, they can make permanent improvements to export prices by repositioning New Zealand wool as a luxury, sustainable fibre.

WPC's marketing arm Wool Partners International has developed a top-end wool label called Laneve, which can be traced back to the individual farms that grew it. It also owns the longstanding Wools of New Zealand brand.

In the past year, it has signed potentially lucrative European and American supply contracts for the fibre, such as its recently announced deal with a Dutch manufacturer to use Laneve in a natural and recyclable carpet called Erutan.

Wool Partners said these contracts are already providing greater returns to farmers.

The PGG Wrightson-backed organisation is not the only such initiative. Rival rural services company Elders operates a similar farmer co-operative and luxury wool brand called Just Shorn.

The battle for farmers' hearts and minds has been complicated by the fact that, after years of languishing returns, wool prices have risen dramatically in recent months.

"The lift in price has probably given farmers a level of comfort and they think, 'oh well, it's okay, I don't need to do anything'," Shadbolt said.

But WPC's overseas customers had indicated their key concerns were price stability and ongoing supply of a quality product. The New Zealand industry currently had no model which provided that, Shadbolt said.

"Unless we put the model in place, we will lose that opportunity to lock in a lot of wool at long-term contracts."

The recent $2 a kilogram lift in prices was worth an extra $200 million a year to the industry and farmers needed to invest those extra returns in their future, he said.

WPC chairman Jeff Grant said the co-op still hoped to get the deal off the ground, as traditionally 80 per cent of acceptances in a public float came in the last few days.

However the offer had to reach the $55 million minimum to proceed and the directors also had to be confident the co-op would reach the original target of $65 million within 12 months.

The campaign against the offer had reached surprising levels, he said. "Without any doubt the viral email campaigns haven't been helpful."

Wool exporters oppose the deal as they fear their livelihoods will be threatened by single desk organisations.

Council of Wool Exporters president John Dawson said it made no apology for asking hard questions about the detail in WPC's prospectus.

The level of disclosure has been criticised by accounting professor Alan Robb. WPC subsequently included additional financial statements.

Dawson described the open letter as "a last-ditch, scaremongering effort". Wool prices were at a 20-year high and growers had nothing to fear if the float failed. "The industry does not need rescuing."