Japanese giant Sumitomo buys Nelson forests for $370m to secure wood supply
Giant Japanese company Sumitomo has bought out Hancock Forest Management's 30,000 hectares of Nelson region pine forests in a $370 million deal that gives its big Richmond timber processing plants long-term security of supply.
Sumitomo is 100 per cent owner of Nelson Pine Industries (NPI), which produces large export volumes of medium-density fibreboard (MDF) and laminated veneer lumber (LVL) from its sprawling site just outside Richmond.
The purchase was concluded just before Christmas and was still subject to Overseas Investment Office approval, NPI managing director Murray Sturgeon said.
NPI already has 5000ha. The buyout covers the former Baigent forests to the east of Golden Downs, and a smaller area at Hira, east of Nelson city.
READ MORE: The story of Nelson's forestry giants
Hancock, a huge US-based forestry investor and management company, had decided to sell its South Island forests "because their term was up for that investment", Sturgeon said.
"So it was going to be sold, and we encouraged Sumitomo to support the bid."
He said the investment was made "to secure the investments they already have in the MDF and LVL business".
"You don't need to be Argus the Boy Wonder to believe that if a successful bidder was from China, then the logs might have been going offshore, and expose Sumitomo's investment."
Sumitomo would own the forests through its New Zealand arm, which holds all of NPI.
"It shores up the security of the existing investment," Sturgeon said.
"In my view it's a better owner than previous, and we can control our destiny now."
He said the management of the forests was yet to be worked through, with Sumitomo not taking over until June.
West Coast-Tasman MP Damien O'Connor said Sumitomo was a key player in the region's economy, and was a clear example of positive foreign investment.
"The whole timber and forest industry has been through a period of disintegration in terms of ownership of forest rights and processing.
"It's a positive move to see more vertical integration, even if the reality of that in many cases will mean total ownership by foreign interests."
O'Connor said Sumitomo's investment in Richmond was a great example of foreign investment in greenfields projects that added real value to an economy.
"What we're seeing too much of is of course a transfer of assets into foreign hands with no substantive additional benefit.
"Sumitomo has invested huge amounts in additional processing and this move to secure supply is an understandable one, and probably beneficial to the region."
Nelson MP Nick Smith said Sumitomo had always felt a vulnerability around the supply of wood to its investment of more than $800m in its Nelson plant.
Sumitomo was one of the more constructive long-term investors in the New Zealand economy and he wouldn't foresee "major difficulty" in getting OIO approval for the buyout.
Over the last 30 years NPI was one of the few examples of increased investment in processing domestic logs, and he hoped this new investment would give Sumitomo the confidence to further expand its processing, Smith said.
Nelson Regional Economic Development Agency chief executive Bill Findlater also welcomed the news as positive for the region.
"It just makes things stronger for Nelson Pine. It gives them more surety and then gives the region more surety.
"Sumitomo have got a very good reputation. From what I've heard of them world-wide, I don't think you could have a better international partner.
Findlater said many people were not keen on foreign ownership by multi-nationals, "but there's some really positive aspects to it as well".
* Established in 1984, NPI has grown to employ a highly-skilled workforce of 220 at its Richmond complex, and contributes about $250m a year to the regional economy.
* Its 35-hectare site contains 8.3ha of buildings that house five production lines processing 40 per cent of Nelson-Marlborough's pinus radiata.
* Its first MDF line was commissioned in 1986, a second in 1991 and a third in 1997.
* The veneer plant for LVL production started up in 2001.
* By October 2014 NPI had produced 8 million cubic metres of Golden Edge MDF from 466,000 truckloads of wood. MDF is made by breaking down wood chips into fibres, and using resin to bind them together before they are pressed under heat into the final thickness.
* LVL is made by peeling logs on a lathe, clipping the sheets of veneer together and laminating them in a hot press to make beams.
* Murray Sturgeon has been managing director for the whole 30 years of the company's existence.