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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - January 2022 Decision

Wool Scours Go To 100% Foreign Ownership

Wool used to be the industry in New Zealand (I even played a modest part in it, spending several summers working in a long-gone Christchurch wool store). Not any more, the country hasn't been on the sheep's back for decades. Sheep numbers and wool prices have dipped precipitously, as farmers have plunged holus bolus into large scale dairy cattle farming - the largest land conversion in NZ's European history. Wool hardly rates a mention now, which is why I've chosen to highlight this one Decision.

Woolscour Holdings Limited, Australia (50%) New Zealand (50%) is buying the remaining 30% of the issued shares in New Zealand Wool Holdings Limited, (the applicant already owns 70% of the issued shares). The vendors are Scouring Investments Limited, China (79.49%), Japan (13.29%) and Australia (6.59%). The price is withheld.

To quote the OIO: "The Applicant's sole business has been to hold shares in New Zealand Wool Holdings. The Applicant is 50% owned by TCP 1A Pty Ltd (part of the Australian investment firm, Tanarra Capital), and 50% owned by Ferrier Woolscours (a New Zealand company long involved in the wool scour industry)".

"The Applicant is increasing its shareholding in the Vendor's company from 70% to 100%. The Target is the parent company of the Woolworks wool scouring business. The business comprises New Zealand's three operational wool scours in Hawkes Bay and Canterbury. The scours operate as commission wool scours, scouring 75% of New Zealand's wool for local and export customers".

The Tanarra Group is headed by prominent Australian investment banker John Wylie. Tanarra Capital's Website says it has "$A2.3 billion in assets under management and individual mandates" and that it invests in "mid-market Australasian businesses". IBISWorld, in its "Wool Scouring In New Zealand Industry Outlook (2021-2026)" says: "The Wool Scouring industry is anticipated to perform modestly over the next five years. Chinese wool production is forecast to continue rising over the period, limiting demand growth from this key export market".

"Weaker growth in the domestic price of sheep meat compared to wool over the next five years is projected to encourage some sheep farmers to shift their focus towards wool production to achieve comparatively higher returns. This trend is likely to boost industry revenue. However, the quantity of domestically produced wool is expected to fall, negatively affecting the industry. Nevertheless, New Zealand's reputation for high-quality wool is projected to sustain export demand, assisting demand for scouring, carding and combing services".

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