AWEX CEO Mark Grave – board decided not to progress discussions

THE latest merger discussions between the Australian Wool Exchange and the testing company AWTA Ltd have stalled despite estimated efficiency gains of more than $1 million a year.

The discussions that began late last year are believed to have faltered after AWEX sought a guarantee from AWTA of funding for traceability proposals.

AWEX chief executive officer Mark Grave told Sheep Central that AWEX engaged in preliminary discussions with AWTA late last year regarding a potential merger.

“After careful consideration, the AWEX board determined not to progress the discussions further.

“The board remains focused on AWEX’s role in delivering value to its members and the industry,” he said.

Neither Mr Grave nor AWTA managing director Michael Jackson have been prepared to detail why the merger discussions failed; however, Sheep Central has learned that AWEX wanted a guarantee that AWTA invest a dedicated $1 million dollars a year into traceability proposals. AWTA responded it would be willing to make such investments, but any proposals would still need normal AWTA board review; however, AWEX has not responded to this.

AWTA managing director Michael Jackson – ready to talk. Image – AWTA.

Mr Jackson said an initial cost saving estimate of AWEX merging into the testing company AWTA Ltd was just over $1 million a year.

AWTA and AWEX have had previous discussions about merging, but Mr Jackson said AWTA was prompted to renew merger discussions with AWEX by the October 2024 announcement of Mr Grave’s retirement in June this year.

Mr Jackson had calls from some industry people that now would be a good time to remove some duplication. Motivations included the decline in wool production, pressure on the profit and loss sheets of some industry organisations and growers are also doing it a bit hard, he said.

“As an industry-owned company,if there is anything we can do to improve efficiency and show a bit of leadership in that area is, I think, very timely.”

Mr Jackson said both bodies are non-profit distributing organisations with a fee minimisation motive.

“So any efficiencies flow through to the fees that are paid, whether it is by growers or other industry participants.”

Mr Jackson said the AWTA board was unanimously in favour of a proposal that would have merged AWEX into the AWTA structure.

“In our structure we call them divisions; we have a raw wool testing division, we have an agrifood testing division.

“We would have a division for AWEX and all of the AWEX operational staff would have been offered positions in that and would have carried on doing exactly what they do now,” he said.

“The governance of it would come under the AWTA board rather than under a separate board.”

However, Mr Jackson said the feedback from AWEX at the end of February was that it would prefer to maintain its independence.

“We have indicated that we are quite willing to continue the discussion because our board is still in favour of the proposal.”

Mr Grave said the AWEX board sought assurances regarding ongoing funding for AWEX’s services transferring to any merged entity, which were not provided.

“As a result, the board decided not to progress discussions and remains focused on delivering value and benefit to the industry.”

Industry bodies want the talks to continue

Australian Council of Wool Selling Brokers and Exporters president Josh Lamb and National Council of Wool Selling Brokers of Australia president Rowan Woods said they wanted the talks to continue.

Mr Woods said the industry is in a position where these types of discussions need to continue.

“I think we’ve all got to have an open mind on how the industry goes forward from here because the industry is in a very precarious position.

“It’s time to have a look at ourselves and see where we can be rationalised.”

Mr Woods said anything in the industry that is duplicated should be critically analysed.

“There is no need in an industry of this size for duplication.”

Mr Lamb said the industry should be looking at all levels to see where efficiencies and rationalisation can be made, with a view to making industry stronger in the longer term.

“With the structural challenges the industry is facing going forward around supply, the amalgamation of some Industry bodies makes sense and would be inevitable.”

WoolProducers Australia president Steve Harrison, who also sits on the AWTA board, said he believes the merger discussions will continue.

“They will continue to the benefit of all in the industry.”

Mr Harrison said he is not aware that any further talks are scheduled, but he believes they will because he represents growers “and it’s going to be in the best interests of growers that this happens.
“So I will continue to ensure that these discussions are not left on the table as such.”