Gunns wants to buy Auspine because Gunns' forest assets are predominantly from native forests while Auspine's are almost entirely from plantations. In 2006 Australia had 1 million Ha of softwood plantations and 807 thousand Ha of hardwood plantations. Softwood plantations provide something like 80% of Australia's sawn timber, wood panels, and paper production, while the majority of native forests that are harvested are exported as raw woodchips. Most of Australia's hardwood plantations were planted in the 1990's and will start becoming available over the next few years and will be compete with woodchips from native forests. At the same time there is likely to be increased demand for native forests for other services such as carbon sequestration, water catchment and ecological services.
The increasing dominance of plantations means that it is in Gunn's strategic interest to become more involved in the plantations business. Furthermore, state governments have been propping up the native forest sawmilling industry in order to make woodchip exports more palatable to the general public. These subsidies undermine the competitiveness of the plantation industry and mean that it is not in the interest of companies like Auspine to cooperate with organisations like NAFI that oppose the proper regulation of native forest logging. It would quite possibly be Gunns' worst nightmare of the sections of the plantation industry stated publicly that plantations are sufficient for meeting Australia's demand for timber, or that most jobs in forestry are in the plantations sector. If Gunns were to take over Auspine, it would not only allow Gunns to hedge against the increasing dominance of the plantation sector, it also makes it more likely that the plantation industry will continue to cooperate with the native forest logging industry.
The strategic value to Gunns of taking over Auspine is therefore much greater than the value of the assets listed in the targets statement.
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