Tasmanian based woodchipper and timber products group, Gunns Ltd has made another bid to grow its tree-related business.
Almost three weeks ago it bought the ITC Hardwood timber business from Elders, and raised $145 million in fresh capital to pay for it.
Gunns yesterday revealed a conditional proposal to the liquidator of Timbercorp Ltd to acquire forestry assets from the collapsed agricultural tax and projects firm.
Gunns said the assets include land, trees and a forestry operations business.
"The proposal is conditional, and there is no guarantee that the conditions will be satisfied nor that its proposal will form a basis for completion of a transaction," Gunns said in a statement to the ASX.
Investors liked the idea, bidding Gunns shares up 5.6%, or 6.5 cents to $1.21 yesterday.
Gunns said it had talked to potential financiers and a joint-venture partner in relation to the potential acquisition.
"These discussions have not been concluded prior to the liquidator’s date for offers of 18 September, 2009, and as a result, Gunns’ proposal has a number of conditions within its control," Gunns said.
"It is anticipated that the proposal would encompass Gunns, together with a joint-venture partner, acquiring the land, trees and forestry operations businesses from Timbercorp."
Gunns said that it was uncertain how its proposal might develop and understood that it was the liquidator’s intention is to reach agreement before September 30.
About 10,000 people invested $800 million in Timbercorp’s forestry schemes before Timbercorp went into administration in April.
In June, Timbercorp creditors voted to have 41 companies within the group wound up after liquidators said they were hopelessly insolvent.
Timbercorp also operated managed investments schemes (MIS) that grew almonds, olives, mangoes, avocados, citrus and table grapes.
The Adelaide and Bendigo Bank will be vitally interested in the outcome of these talks because it has thousands of clients who were also clients of Timbercorp. The debt is put at a potential $600 million or more.
This push deeper into trees is part of an approach Gunns signalled in its profit presentation in late August and early this month.
It said then its financial result was "adversely impacted by significant reduction in plantation MIS performance".
So it took a "strategic decision to scale back plantation MIS activity", due to the "contraction in the size of the plantation MIS market".
Gunns said its main business, Forest Products, proved resilient with a modest 6% decline in revenue despite difficult market conditions.
It said the "dislocation in plantation forestry sector has created opportunities for Gunns to leverage its forestry management expertise" and the "acquisition of ITC Hardwood provides a compelling strategic fit to deliver synergies and value to Gunns shareholders".
Gunns now has a taste for growth in this area.
