Wool cash requirements set

This article reveals the volume of money required by farmers to invest in the proposed new company to buy out Wool  Services International and merge with Wool Equities. The rapid readjustment downwards of cash needed per farmer for a shareholding, shows farmers have long memories and are not going to get sucked into the wool mistakes of the past.

While wool income has shown a remarkable turnaround in price from a year ago, nobody should forget the years of unsustainable returns for the producers while others in the product chain seemed to all clip the ticket quite nicely. Shearing, transport and other costs associated with removal and selling have all increased and while this attempt at wool reform is rational it can't be achieved without a goal to increase substantially the return to the producer.

Already there have been reports from Cavalier of layoffs blamed at the rising costs of the wool price, so any investment in this direction will need to be well researched and analysed or the history of wasted wool moneys will be repeated.

New Zealand Wool Investment Company Limited (Wool Co) has reduced the minimum investment it requires from farmers in the hopes more will help fund its plan to buy wool processor and exporter Wool Services International. The minimum investment amount has been reduced from $23,750 to $9500 reports Stuff. Newly-formed Wool Co is a joint venture between Wool Equities Limited, which represents 9500 farmer shareholders, and Christchurch-based boutique investment bank Ocean Partners. Wool Co chairman Cliff Heath said there had been a "tremendous" amount of interest from farmers but many had said the original minimum investment was a step too far.

"We have been overwhelmed by the support we have received from farmers on the strategy but many of them were saying [the minimum investment] was too high." Wool Co wants to raise $40 million to buy Wool Services International (WSI) through an offer that is available only to wealthy investors or "Eligible Persons" as defined in the Securities Act. "While many farmers meet the eligible persons criteria under the terms of the offer, given they have had a number of tough years on farm they are telling us that they wish to err on the side of caution with respect to their off-farm investments," Heath said.

WSI is up for grabs because Allan Hubbard-associated company Plum Duff and Woolpak Holdings, which together hold a 64 per cent stake in Wool Services, are in receivership. In June, the Commerce Commission granted Cavalier Wool Holdings authorisation to acquire the wool scouring business of WSI, further rationalising the industry. Carpetmaker Godfrey Hirst has appealed against that decision.Wool Co says it wants to prevent Cavalier, already New Zealand's biggest wool scourer, from gaining a monopoly over the country's wool scouring industry.

Wool Co is running a series of meetings throughout the country during the next fortnight to outline its proposals to potential investors. The closing date for applications is October 28.