Gunns takes stake in Forest Enterprises

Woodchipper Gunns Ltd has acquired a 17.9 per cent stake in Forest Enterprises Australia Ltd (FEA) at 10 cents per share.

Gunns said on Friday it would fund the acquisition of the shares via a placement of 5.7 million Gunns shares and a cash payment of $1.58 million.

"The investment by Gunns recognises the strategic importance to the forest industry of further consolidation," Gunns said.

As well as managing timber plantations, FEA operates a timber mill and jointly owned export woodchip facility at Bell Bay in Tasmania.

Gunns is negotiating finance to develop a $2.2 billion pulp mill at Bell Bay.

FEA said in May that it would have plantations under management in excess of 72,000 hectares at June 30 this year.

The company said at the time that it owned 94,500 hectares in Tasmania, the northern rivers region of NSW, southeast Queensland and the Douglas Daly region of the Northern Territory.

In February, FEA booked a half year net loss of about $4.09 million.

Earlier this week, FEA said sales of its managed forestry investment products for the 2008/09 year just ended totalled about $23 million.

FEA said the collapse this year of the two biggest operators of managed investment schemes in the forestry sector - Timbercorp Ltd and Great Southern Ltd - had affected the inflow of investment into the managed agribusiness investment sector.

But FEA said its diversification into forest products processing was providing multiple revenue streams for the group and enabled it to reduce its reliance on income generated by its investments division.

FEA warned last week that forestry investment sales for 2008/09 were likely to be significantly less than the $60 million achieved in 2005/06 and 2006/07, due to external factors beyond its control.

Shares in Forest Enterprises Australia were 1.5 cents higher at 14 cents on Friday. Gunns was down three cents at 95 cents.