CHH tests rules on sawmills

By PAM GRAHAM

Carter Holt Harvey is sounding out the competition regulator about buying Tenon's sawmills, a move that will give it two-thirds of New Zealand's plywood market.

Tenon put its structural solutions business, comprising a Kawerau sawmill and remanufacturing plant, the Rainbow Mountain sawmill near Rotorua, a Mt Maunganui plywood mill and roundwood plant, on the market after receiving approaches from potential buyers.

Carter Holt has indicated it would like to buy the assets but has not said anything about the sale process.

Analysts said competition concerns would arise in the area of plywood production if Carter Holt bought the business.

They estimated Carter Holt would have 70 per cent of the plywood market.

A purchase by Carter Holt would also reduce the number of buyers competing for wood supply in the central North Island.

Andrew Mortimer, of First NZ Capital, said plywood might be an issue for the Commerce Commission, but he doubted that log-buying would be a concern because forest owners could always export if a domestic buyer was too large.

Other analysts said New Zealand plywood mills also served the Australian market so it would depend on how the commission defined the market.

It is understood that final bids for the assets are due on December 2 and that four private equity firms and three trade buyers are in the process.

Analysts see Carter Holt as the natural buyer.

It talked up its options at its last profit announcement by mentioning a project to build a new super sawmill in New Zealand.

The sale of the Tenon mills will be another chapter in the rationalisation of the local forestry industry.

Large tracts of forests are now owned by international funds that do not own processing businesses.

Wood supply is coming on stream in Northland, but there could be a shortage of some grades of logs in the central North Island while some replanted forests mature.

Carter Holt is keeping its forests in the centre of the North Island and in Northland but is selling forests in other regions.

Tenon's structural assets were valued at between $123 million and $144 million by Grant Samuel in May.

They are being sold in one line.

Ernslaw One, which has just bought a sawmill and forests on the East Coast, has said it is not interested in Tenon's mills and Weyerhaeuser dismissed speculation that it is a potential buyer.

Speculation is now focused on private sawmill owners from New Zealand and Australia as potential trade buyers.

Private equity firms are awash with money but analysts cannot see why such firms would want the processing assets beyond breaking them up for resale.