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http://www.theaustralian.com.au/business/industry-sectors/push-for-gunns-to-break-with-the-past/story-e6frg95o-1225864254791

Push for Gunns to break with the past

* Matthew Denholm, Tasmania correspondent
* From: The Australian
* May 10, 2010 12:00AM

THE largest shareholders in Gunns are pushing for the removal of directors John Gay and Robin Gray from all positions within the timber empire to help it establish a "social licence".

Both men have already resigned or announced an intention to quit Gunns. However, the two biggest shareholders - Perpetual and Concord Capital - are understood to be demanding they also quit the company's subsidiaries.

In particular, there is anger that Mr Gay, who has presided over a share and profits slump, is to be chairman of a new subsidiary, Southern Star, which will hold Gunns' local plantations and pulp mill project.

Perpetual and Concord would not comment, but industry sources are aware of active efforts to persuade Gunns to make a cleaner sweep than is currently proposed.

Activists have dangled the offer of a conciliatory approach to the company and its proposed $2.5 billion Tamar Valley pulp mill if shareholders force changes.

Some shareholders believe the company needs to renew under a new leadership if it is to break with past controversies and obtain a social licence, a prerequisite to Forest Stewardship Council certification and a joint venture with pulp producer Sodra.

In late March, The Australian revealed several shareholders were in talks with opponents of Gunns' operations about ways to achieve this.

On April 23, Gunns announced that that under a restructure Mr Gay would leave the board before the company's AGM in November, while Mr Gray would retire by July.

Gunns told the stock exchange that Mr Gay would become chairman of Southern Star and Mr Gray would remain a director of Gunns Plantations.

Last week, the resignation from Gunns of Mr Gray was brought forward and made effective as of Thursday.

When The Australian asked Mr Gay if he was aware of such moves, the phone line went dead, while Mr Gray could not be contacted.

A Gunns spokesman responded to the same question by saying: "We don't comment on talks that we may or may not have had with shareholders."

A downturn in demand for woodchips from Gunns' Asian customers, who are increasingly demanding FSC certification, has forced the shutdown of the Gunns Long Reach mill for three weeks and its Triabunna and Burnie mills for two weeks.

Gunns and industry sources dismissed an overseas report suggesting Sodra had withdrawn from pulp mill discussions.

While Sodra has insisted Gunns adopt FSC certification and modify the mill's proposed bleaching technology to totally chlorine free, it is not thought to have closed the door to a deal.