Haggle at t'mill: Carter Holt may buy Tenon's timber assets

By PAM GRAHAM

Tenon is tipped to sell structural sawmill assets worth as much as $140 million to Carter Holt Harvey.

This is the view of the market even though Tenon chairman Tony Gibbs said yesterday that there was no plan to sell assets.

Carter Holt has said it is interested in buying the sawmills, which produce framing timber.

There are no indications of talks on such a deal but analysts say it makes sense in the medium term.

If Tenon sold its structural sawmills it would be left with operations in Taupo, comprising a sawmill and wood products plants, and its North American distribution business.

The issue will be whether Carter Holt can gain enough cost savings to make the deal worthwhile.

Tenon's structural assets were valued at between $123 million and $140 million by Grant Samuel & Associates in an independent report when Tenon's biggest shareholder, Rubicon, bid for control.

That included two big structural sawmills, Kawerau and Rainbow Mountain, and the Mt Maunganui plywood mill, Kawerau remanufacturing plant and Ramsey roundwood plant.

Analysts say Rubicon has just paid a full price to gain control of Tenon and will be looking for a profit on any asset sales.

They see Tenon either emerging as a specialists distributor of wood products or being totally broken up.

"At this point in time there is no plan to sell any assets," said Gibbs.

"That is not to say we will not review the assets in due course. Off course we will - you always do.

"All that is happening at the moment is scuttlebutt and rumour."

Analysts say timber framing is a commodity business and the way to run it is to have big mills with economies of scale.

Tenon's Kawerau mill produces Origin Timeframe timber for the domestic market and feedstock for a remanufacturing plant. Rainbow Mountain, south of Rotorua, produced 156,000cu m of Origin Outdoor timber for transtasman markets in the year to June 30, 2003.

Carter Holt has deep pockets even after returning $480 million to shareholders via a share cancellation and cash payment after selling its tissue business.


Tenon NZ units

* Structural

Kawerau sawmill

Rainbow sawmill

Mt Maunganui plywood plant

Ramsey roundwood plant

* Appearance grade

Taupo sawmill

Taupo mouldings plant

Taupo boards plant