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Godfrey Hirst loses Cavalier legal bid

NZN 29/11/2016 Jonathan Underhill

Australian-owned carpet maker Godfrey Hirst has lost its bid to overturn plans backed by rival Cavalier Corp to create a monopoly in New Zealand wool scouring.

The Court of Appeal has dismissed Godfrey Hirst's appeal against earlier decisions by the Commerce Commission and the High Court to allow the merger of the wool scouring operations of New Zealand Wool Services International and Cavalier's 50 per cent-owned Cavalier Wool Holdings.

The regulator had allowed the merger of the nation's wool scouring plants, creating a monopoly in the supply of wool scouring services and the supply of wool grease on the trade-off that there was a broader public benefit in fending off competition from cheaper foreign rivals, such as scours in China.

Cavalier, whose shares were halted pending the announcement, said it welcomed the decision.

Godfrey Hirst first appealed to the High Court over the regulator's decision but that was dismissed in June. It was then granted leave to take a challenge to the Court of Appeal but only on the narrow issue of whether the earlier ruling was mistaken in agreeing with the Commerce Commission's treatment of productivity gains flowing to foreign shareholders.

Shares of Cavalier last traded at 73 cents and have gained about 20 per cent this year. At the start of November, the Auckland-based company said 2017 earnings could fall as much as 52 per cent as the carpet maker incurs one-time costs to consolidate its manufacturing operations.

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