JOHN LAWRENCE
It didn’t take long for Gunns’ new CEO Greg L’Estrange to find himself in deep water.
FEA have clearly been vulnerable ever since their half yearly financial statements issued at the end of February 2009. The latest 80% drop in MIS sales confirmed their fragility.
Gunns have just bought off-market 72.5 million shares representing 17.9% of FEA.
FEA major shareholder, with 31%, was ITC, a MIS company 100% owned by Elders, currently in the process of debt reconstruction.
Gunns only paid $7.25 million for the 17.9% interest (valuing FEA at $40.5 million as there are 405 million shares on issue).
Gunns had to find $1.58 million in cash. The rest of the purchase price was in Gunns shares.
The vendor must have been keen to exit FEA.
FEA are staggering at this stage and may well require cash support in the near future if land sales don’t eventuate.
Gunns by taking up a strategic stake at this stage are clearly putting up their hand to help out.
But if a serious injection of cash is required then from where will it come?
From a Company that is planning the biggest private investment ever in Tassie?
That can’t raise the last $50 million (or is it $100 million, Robert?)?
If it does then what will be the result?
A further concentration of the forestry industry in Tassie?
A major problem with the forest industry in Tassie over the last 10 years has been the increasing concentration in the hands of one player.
Gunns has negotiated a low stumpage price for native forests, it is a major player in woodchips, both from plantations and from our native forests. If it gains controls of the majority of our softwood resource via FEA and their state of the art sawmill at Bell Bay, then the result will be a disaster for all Tasmanians.
Barry might retain his job, but the rest of us will be worse off.
We shouldn’t be cheering the demise of FEA, or indeed Gunns, but lamenting the loss of a valuable industry.
