Louisiana-Pacific Corporation (LPX) recently terminated its deal with Ainsworth Lumber Co. Ltd. (ANS.TO), as the necessary regulatory approvals could not be obtained. The regulatory approvals demanded additional divestitures than those decided in the previously decided acquisition agreement.
On Sep 4, 2013, Louisiana-Pacific entered into an agreement with Vancouver-based Ainsworth to acquire all of the outstanding common shares of the company for about $1.1 billion. The agreement was expected to be completed by the end of 2013, if all the regulatory approvals were obtained.
Ainsworth primarily engages in manufacturing and marketing oriented strand board (:OSB) products at facilities throughout North America and Asia. Ainsworth is one of largest producers of OSB in North America and has recently achieved the status of being the biggest supplier of OSB products in Japan.
Had it taken place, the acquisition would have increased the production capacity of Louisiana-Pacific’s OSB segment due to the addition of Ainsworth’s four manufacturing facilities. Louisiana-Pacific would also have gained access to the high-growth Asian markets with significant returns.
However, regulatory approvals could not be obtained under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the Canadian Competition Act. As a result, the agreement had to be terminated, despite being an excellent strategic fit.
Louisiana-Pacific has been reporting losses for the past two quarters, owing to huge foreign exchange losses and lower pricing in OSB. However, the company continues to be optimistic about the increase in residential construction spending and believes that it will boost its business in the long term.
Louisiana-Pacific carries a Zacks Rank #3 (Hold).
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