The arrangement agreement between Ainsworth Lumber Co. Ltd. and United States lumber giant Louisiana Pacific was mutually terminated on May 14.
The two companies entered the agreement on Sept. 4, 2013 with the understanding a wholly owned subsidiary of Louisiana Pacific would purchase all of Ainsworth’s outstanding shares for $1.1 billion.
At the time, Ainsworth president and CEO Jim Lake told the 100 Mile House Free Press, the local Ainsworth Engineered oriented strand board (OSB) plant figured significantly in the deal because Louisiana Pacific is interested in the Asian market and the 100 Mile plant was already an important supplier of OSB and other speciality products to Asia.
“100 Mile is also very strategic with some of our other value-added products, specifically the products that we sell into the engineered wood business, he said.
“And, that is all part of why LP likes us – they like our mix of products and our geographic channels that we go [in] to the markets.
“I’m sure they have no intentions of changing that; if anything, they are going to want to grow from where they are.”
Going into the arrangement agreement, the companies knew there was a lot of work to do because they had to deal with antitrust and competition issues on both sides of the border.
They worked together and were in constant contact with the United States Department of Justice (DOJ) and the Canadian Competition Bureau (CCB) in an effort to persuade the antitrust and competition watchdogs that the transaction should be allowed to proceed.
After months of effort, it became apparent to Ainsworth and Louisiana Pacific that the deal wouldn’t go through without selling off subsidiary business interest or investments (divestitures) that were significantly beyond those contemplated by the companies.
Louisiana Pacific CEO Curt Stevens said the “transaction would have led to positive outcomes for the customers, employees and shareholders,” and the company fundamentally disagrees with the analysis of the antitrust agencies.
“We will continue to compete on a continent-wide basis but feel we have no choice but to terminate the agreement rather than accept the distraction, disruption, costs and risk of litigating this matter in both the U.S. and Canada, where the process could take upwards of a year.”
Although Ainsworth is disappointed with this outcome, Lake said the company looks forward to advancing the ongoing growth and success of the business.
“Our strong competitive positioning, combined with our additional low-cost capacity and strong balance sheet profile, will allow us to capitalize on the expected recovery in the U.S. housing market and continued growth in our export markets…..”
According to the terms of the arrangement agreement, no termination fee will be payable by either party.
When the agreement was announced last September, a lot of people saw the deal as an opportunity to secure work at the OSB plant for many years down the road.
When 100 Mile Mayor Mitch Campsall learned about the agreement termination during a phone call from Ainsworth woodlands manager Rick Takagi on May 15, he was initially disappointment; however, that changed after their conversation.
“Rick Takagi told me Ainsworth wants to move forward in a positive manner from this decision and I want to be on that same wavelength with them. They are going forward in a positive effort and I think the community has to go with them.
“It’s not the greatest thing in the world, but their management is looking at it positively and they kind of asked me to do that, too, and I’m willing to do that. We still have Ainsworth and they still have have OSB and we have to move forward from there.”