Last bids due in on Tenon sale

The sale of Tenon's sawmills in the centre of the North Island is at a critical point, with last bids and a Commerce Commission decision due.

At stake for the private equity firms and trade buyers competing in the process are Tenon's sawmill in Kawerau, the Rainbow Mountain sawmill near Rotorua, a plywood mill at Mt Maunganui and the Ramsey Roundwood business, which makes posts and landscaping products.

Carter Holt Harvey is seen as the buyer that can extract the most synergies and, therefore, the one that should pay up. But it is not known if it will.

The commission decision on whether it can buy all Tenon's structural timber assets - they are being sold in one line - is due today, but it is not seen as a deal-breaker.

Analysts said the area of concern for competition is the domestic supply of plywood, because a purchase would give Carter Holt about 75 per cent of the market.

Carter Holt argued in its application to the commission that the market was open to imports.

If Carter Holt gets the thumbs down from the commission it could agree to divest the plywood part of the business.

Carter Holt's strategy is to be the No 1 supplier in its chosen product areas in the Australian and New Zealand domestic markets and it has been quietly achieving that with small purchases in both markets during the past decade.

Grant Samuel valued the mills at between $123 million and $144 million, but Tenon's main shareholder, Rubicon, claims that new equipment at the Kawerau sawmill will increase earnings by $5 million a year. This could add $40 million to the sale price.

No bidders have publicly confirmed they are in the sale process, but speculation has centred on Carter Holt and Australian private equity firms Pacific Equity Partners and Gresham.

The sale process started after Tenon, the rebranded Fletcher Challenge Forests, received approaches for the assets.

A sale leaves Tenon as a listed company owning just a Taupo sawmill and mouldings plant that process appearance grade lumber, together with investments in North American distribution networks that supply some of the biggest do-it-yourself chains in America.

Its majority shareholder, Rubicon, is also listed, with 90 per cent of its assets invested in Tenon.

ON THE BLOCK

* Four timber entities are for sale.

* No bidders have confirmed they are in the sales process.

* Carter Holt Harvey is seen as the company best able to extract new synergies.

* New equipment at the Kawerau sawmill could add another $40 million to a sales price put at between $123 million and $144 million.