Final checks on Tenon as time runs out

By PAM GRAHAM

Private equity and trade buyers are checking out Tenon's structural sawmills as the deadline for bids looms on Thursday.

The Tenon board will decide by early next week where next to take the process.

The mills, big employers in small towns throughout the central North Island, were valued between $123 million and $144 million by Grant Samuel in May.

Carter Holt Harvey is seen as the trade buyer that can extract the biggest gains by putting the mills together with its forests and other processing businesses, but it is not known for overpaying. And Tenon is controlled by Rubicon, regarded as a canny vendor, and is chaired by experienced Guinness Peat Group director Tony Gibbs.

Up to seven private equity and trade buyers are believed to be checking out the assets.

Investment bankers said the true level of interest would be known when bids were placed.

There was speculation that a joint venture which allowed Tenon to retain some ownership while extracting synergies by running the assets together with another player was being considered as well as a straight sale.

A tie-up to a company with a distribution chain into the building industry was also an option.

Gibbs said the sale process was progressing and the board would consider what was best for shareholders.

The decision to review the sawmills, which supply timber framing to the local building industry, came after unsolicited approaches were received.

Bidders have to assess how long the industry will stay at the peak of its present cycle.

An exit from structural sawmilling would allow Tenon to focus on its appearance-grade timber assets and a distribution network in North America.

Tenon is the business left over after Fletcher Challenge Forests sold its forests. It is now controlled by Rubicon.

Forest industry observers see the sale as another step in a consolidation in the forestry industry and wonder whether wood supply to the mills will become an issue for buyers as they progress due diligence.

Harvests have been cut to rebuild forests in the central North Island after they were overcut.

UBS Warburg, Cameron & Co and ABN Amro are all thought to be advising potential buyers, though none would comment yesterday on who they were.

The biggest mills for sale are the Kawerau sawmill and the Rainbow Mountain sawmill.

Carter Holt Harvey has said it is interested in the sawmills but is now not commenting further.

The bids for the mills are due a day after Carter Holt reports its quarterly earnings. It is expected to update the market on a review of its forest estate, which is the largest in the country.