New Forests and Global Forest Partners bids for forestry assets hit by competition concerns

The two managers’ offers for assets owned by Resource Management Service have raised concerns with the ACCC over a potential reduction in export services.

The Australian Competition and Consumer Commission has raised preliminary concerns over bids by New Forests and Global Forest Partners to buy forestry assets in Tasmania owned by Resource Management Service.

RMS is selling its hardwood plantations in the state and its one-third stake in wood chip marketing and export business the Plantation Export Group through a competitive tender process.

The competition watchdog has been examining two bids for the RMS assets, one from New Forests and another from a fund advised by Global Forest Partners.

New Forests is the largest operator of hardwood plantations in Tasmania. Funds controlled by the asset manager currently own wood-chipping mills in the Burnie area of north-west Tasmania and at Long Reach, north-east Tasmania, and it has its own wood-chip marketing and export business. It also manages funds which own softwood plantations and a timber mill.

GFP owns hardwood plantations and wood-chipping mills in the state, and exports wood chips through its own facilities.

The ACCC said it was likely that both bidders would divert volumes from the RMS assets away from the PEG business to their own export operations, meaning that PEG “would become unviable, or at least inefficient.” PEG currently provides marketing and export services for logs grown on the RMS estate and its wood chips account for a large share of the volume exported by PEG, according to the ACCC.

Only New Forests’ bid has raised competition concerns in Burnie, with a successful bid likely to see the asset manager “become the only exporter from Burnie, making it the sole buyer of private plantation timber or wood chips” in the state, ACCC commissioner Stephen Ridgeway said in a statement.

“We have the strongest competition concerns about the impact of the New Forests bid on exports from Burnie, in Tasmania’s north-west,” Ridgeway said.

“The diversion of RMS’ wood chips into the export operations linked with New Forests, could jeopardise access to the export channels in Burnie by other market participants. This is likely to result in a reduction in buyers of plantation timber from private growers, reducing the price paid to growers.”

Both the New Forests and GFP bids raised concerns about exports from Bell Bay, Tasmania, where one of New Forests’ wood-chipping mills is located.

“Export options here could be reduced from three to two at Bell Bay, and this loss of a third option could weaken the level of competition for timber from private growers,” Ridgeway said.

The ACCC said that the GFP bid did not raise competition concerns in Burnie, as it would likely establish its own export operation in the area.

New Forests and GFP did not respond to requests for comment.

A market source told Agri Investor: “Both GFP and New Forests have been successfully operating throughout Australia for decades. Ultimately, the market dynamics and logistics in support of the Tasmanian export supply will sort itself out, irrespective of who the eventual buyer of the RMS assets is.”

The ACCC is taking submissions from interested parties on its preliminary concerns until 10 October, with a final decision on the bids scheduled for 5 December.

The ACCC also announced this week that it was extending its review of the proposed sale of Graincorp’s Australian bulk liquid terminals to ANZ Terminals by a period of two weeks, from 17 October to 31 October.

ANZ Terminals is an independent owner and operator of bulk liquid storage facilities in Australia and New Zealand, and counts several infrastructure fund managers and institutional investors among its shareholders. Palisade Investment Partners manages a 32 percent equity stake in ANZ Terminals on behalf of its open-ended Diversified Infrastructure Trust and two unidentified direct mandates, according to a statement it made upon acquiring the stake in November 2014.

First Sentier Investors (formerly known as Colonial First State Global Asset Management) holds a stake in ANZ Terminals of around 23 percent, via its Global Diversified Infrastructure Trust, while Canadian managers Northleaf Capital Partners and Fengate Capital are also known to be shareholders. All acquired their stakes from Macquarie Group in late 2014, with Macquarie Capital then retaining a stake of around 10 percent.

The ACCC opened an inquiry into the sale following Graincorp’s acceptance of a bid from ANZ Terminals of approximately A$350 million in March 2019.