The Commission has given clearance for Oji Oceania Management (NZ) Limited (Oji) to acquire up to 100% of the shares in Carter Holt Harvey Pulp & Paper Limited from Carter Holt Harvey Limited.

Through its ownership links with Pan Pac Forest Products Limited, Oji owns forests, a saw mill and a pulp mill in Hawke’s Bay. As a result of the acquisition, Oji will own Carter Holt Harvey’s pulp and paper business which includes the Kinleith pulp and paper mill, and the Tasman pulp mill in the central North Island.

“The Commission is satisfied that the merger will not have, or would not be likely to have the effect of substantially lessening competition in any of the affected markets,” said Commerce Commission Chairman Dr Mark Berry.

“Oji’s mechanical pulp mill and Carter Holt Harvey’s kraft pulp mills produce different types of pulp so the merger is unlikely to result in any change to the competitive situation in respect of the supply of pulp,” said Dr Berry.

The Commission also considered the impact of the merger on the markets in which Oji and Carter Holt Harvey buy pulp logs and wood chips; the principal inputs used in their pulp mills.

The Commission identified that some pulp log and wood chip suppliers that currently supply Oji or Carter Holt Harvey could lose a competing buyer as a result of the merger. The Commission therefore considered whether Oji would be able to depress the prices it pays to those suppliers to such an extent that the suppliers might reduce the quantity of pulp logs that they produce.

”However, the Commission considers that as pulp logs are a by-product of saw logs, the quantity of pulp logs produced is driven largely by the price of saw logs. As such, the merger is unlikely to result in any reduction in the quantity of pulp logs produced,” said Dr Berry.

“While the removal of a potential competing buyer for wood chips may lead to a decrease in the prices Oji pays affected suppliers, it is unlikely to lead to a reduction in wood chip output because Oji requires the chips from all of its suppliers to enable its pulp mill to run at capacity,” added  Dr Berry.

A public version of the written reasons will be available shortly on the Clearances Register.

Background

Oji is a wholly-owned subsidiary of JP NewCo, a company that at the time the Commission received the application was a wholly owned subsidiary of Oji Holdings Corporation (Oji Holdings). However, at the time the acquisition settles, it is intended that JP Newco will be owned 60% by Oji Holdings and 40% by Innovation Network Corporation of Japan (INCJ). INCJ is a corporation sponsored by the Japanese government and private enterprises aimed at promoting innovation and enhancing the value of businesses in Japan. INCJ has no existing investments in New Zealand.

Carter Holt Harvey Pulp & Paper Limited (CHHPP) is ultimately owned by Mr Graeme Hart. Apart from the Kinleith and Tasman mills, CHHPP also includes the Penrose paper recycling mill; the Fullcircle waste paper collection and processing business; the Lodestar logistic and transport business; and various packaging operations.

Carter Holt Harvey’s New Zealand building supplies business and New Zealand and Australian wood processing operations, and SIG’s Whakatane carton board mill, all of which are ultimately owned by Mr Hart, are not included in the current transaction.