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ACCC opposes Gunns’ ITC acquisition

Posted on November 26, 2009, 12:12pm

The Australian Competition and Consumer Commission will oppose Gunns’ acquisition of ITC Timber due to concerns the sale would diminish market competition.

Gunns announced at the end of August it had agreed to owner Elders’ terms of sale for the timber processing division of ITC, which is separate to the forestry and managed funds sections of the business and includes mills in Victoria, Tasmania and New South Wales.

The purchased was to be financed through $145m capital raising, which was completed in September, but remained conditional on ACCC approval.

Gunns announced this week it would change the sale agreement due to ACCC opposition, which focused on concerns over the Tasmanian Bell Bay SmartFibre woodchip export joint-venture between Elders and Forest Enterprises Australia.

“The ACCC concluded the acquisition by Gunns of ITC Timber’s 50pc stake in the SmartFibre wood chip joint venture would be likely to substantially lessen competition in the market for the acquisition of hardwood pulpwood in north-eastern Tasmania,” ACCC chairman Graeme Samuel said this week.

Mr Samuel said the ACCC had conducted extensive inquiries with alternative producers and found suppliers of hardwood pulpwood in north-eastern Tasmania, particularly farmers and private plantation owners, would face lower prices for their timber if the acquisition proceeded.

“The proposed acquisition would reduce the number of significant independent acquirers of hardwood pulpwood in the region from three to two, with the remaining competitor to the merged firm unlikely to provide an effective competitive constraint,” he said.

Gunns announced this week that it would exclude the 50pc stake in SmartFibre from the proposed sale in light of the ACCC decision and proceed with the balance of the transaction.

“There are no significant changes to the expected benefits of the acquisition in the integration of the Gunns and ITC hardwood timber operations arising from the exclusion of the SmartFibre joint venture interest from the transaction,” according to a Gunns statement to the stock exchange.

The SmartFibre enterprise has a value of $9.3m — representing 10pc of the total transaction.

Gunns and Elders are seeking confirmation within a week that the ACCC has no objection to the revised deal.

Meanwhile, Gunns, which purchased Auspine in 2008, is in the final stages of negotiations to take control of 42,000 hectares of Green Triangle plantations established by failed agribusiness Great Southern.

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