A PROPOSED merger of Australia’s wool-testing authority, the AWTA, with industry wool marketer, the Australian Wool Exchange, appears unlikely to get to the discussion stage.
Despite the final report of Australian Wool Innovation’s Wool Selling Systems Review seeing cost savings in a AWTA and AWEX merger, and merit in the companies jointly operating the proposed Wool Exchange Portal, “either in partnership or by virtue of their merger” AWEX’s board has ruled out initiating or participating in merger discussions.
AWTA managing director Michael Jackson said the company’s board remained open to discussions with AWEX regarding a merger “where it can assist the industry, but it is up to AWEX to indicate to us that they want to be involved in those discussions.”
“We have indicated to them that we are prepared to enter into those discussions.”
No support from AWEX membership for a merger
AWEX chief executive officer Mark Grave said the company’s board had agreed that whilst the services provided by AWTA and AWEX are complementary, “there was no support from our membership to merge the two organisations or AWEX with another organisation.”
He said the AWEX directors had received feedback that its members valued the independence and services that the company provided and there was little to gain from a merger.
“So we won’t be pursuing that.”
Mr Grave said the AWEX board, despite the lack of detail on the proposed Wool Exchange Portal, was prepared to participate in WEP discussions “and assess whether the concept has veritable value.”
“We’ve not been told about any steering committee – we’ve only read the report, we haven’t been approached by anybody in relation to any of the recommendations (including potential WEP ownership).
“We need to know what it is first and that still has to be articulated and we will wait for that to happen.”
AWTA believes current structure is “appropriate”
AWTA managing director Michael Jackson said the board met last week to review the WSSR’s recommendations in relation to the company.
The review panel found there was potential for a tax-equivalent R&D investment to be made by AWTA given its current tax-free status, but Mr Jackson said the board was strongly of the view that the company’s structure remained appropriate and has performed extremely well.
“Since the time of industry deregulation our average annual performance has been a profit of about half a million dollars.
“We would have paid about $150,000 in tax and we have actually spent about $1.2 million a year on research and development,” he said.
“At the same time our fee for doing a wool yield, micron, length and strength test — our fee for a normal test for wool – was $69.24 in 1991-92 and it is $71.10 in 2014-15.
“In the same period of time inflation has gone up 61 percent,” Mr Jackson said.
“So we think that shows that our structure has protected against any form of monopolistic behaviour and the directors are firmly of the view that it is appropriate that we retain that structure.”
Mr Jackson said AWTA was “more than happy” to be involved in a WEP steering committee, provided it is broadly representative of industry.
“And in saying that we are saying it needs to include buyers and sellers, not just AWI, AWTA and AWEX.
“At the moment we still need to see the details of the WEP fleshed out and see exactly what it will encompass,” he said.
“The other requirement we would have, and part of being an independent test house, is that we don’t favour one supply chain over another.
“So we wouldn’t want to be in there to champion one solution over another solution.”