Carter Holt to buy Tenon's Structural Solutions business

Carter Holt Harvey is to buy Tenon's Structural Solutions business for $165 million plus working capital.

Including working capital from log procurement, this would increase to about $170 million.

The deal is conditional on the completion of an upgrade of the Kawerau sawmill, as well as other commercial conditions.

Tenon said in a statement these conditions should be fulfilled in the first quarter or early second quarter of next year.

The Structural Solutions business main assets includes a sawmill at Kawerau, a sawmill and roundwood operation at Rainbow Mountain near Rotorua, and a plywood mill at Mount Maunganui.

In May Grant Samuel valued the business at $123 million to $144 million.

The purchase price represents a multiple of 6.5 times normalised 2004 earnings before interest, tax, depreciation and amortisation (ebitda) of $25.5 million, which includes the expected benefits of the Kawerau Sawmill upgrade.

Carter Holt yesterday received clearance from the Commerce Commission for the purchase.

CHH chief executive officer Peter Springford said the purchase was an opportunity for CHH to grow its position in wood products.

Tenon's chairman Tony Gibbs said a recently completed strategic review found Tenon could create more value for shareholders by selling the Structural Solutions business than by hanging onto it.

"We conducted a very robust process, and we received a number of credible, fully financed, offers for the business. We are confident that this is the best price we could achieve for the business, and the sale is clearly value-creating for Tenon shareholders," Mr Gibbs said.

Tenon will retain its mill and other facilities at Taupo and its overseas activities including its investments in North America and Europe.

Following the sale and second capital return of $321m from the $725m sale of Fletcher Challenge's forests, Tenon will be cashed up and have no debt.

Goldman Sachs JBWere (NZ) Limited advised Tenon in respect of the sale.

Shares in Carter Holt Harvey rose 3c to $2.05 on the news, while Tenon shares jumped 6c to $2.22.

- NZPA