Louisiana-Pacific, Ainsworth Drop Plan to Merge

By Dow Jones Business News, 
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Louisiana-Pacific Corp. and Ainsworth Lumber Co. have dropped their planned combination rather than face a possible legal battle with regulators over required divestitures, the construction materials suppliers said Wednesday.

The companies said they mutually agreed to terminate the deal and that no breakup fee will be payable by either party.

"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, " said Curt Stevens, Louisiana-Pacific's chief executive, in a joint statement.

The news sent the shares of Vancouver-based Ainsworth down 9.3% to 3.13 Canadian dollars($2.89) in Toronto Stock Exchange trading.

Nashville-based Louisiana-Pacific had announced plans in September to buy Ainsworth for about $1.1 billion, including debt, in a bid to capitalize on the U.S. housing recovery. But the companies said last week they could be facing a legal fight with the U.S. Justice Department and Canada's antitrust regulator over required divestitures to complete the deal.

"Although we are disappointed with this outcome, we look forward to advancing the ongoing growth and success of our business," Ainsworth Chief Executive Jim Lake said.

Some analysts had suggested regulators were particularly concerned the companies would have too much pricing power in western Canada because of their large market share in the region. TD Securities estimates the combined entity would control about 51% of oriented strand board production capacity in that area.

Oriented strand board is a material often compared with plywood, and is used for walls, flooring and roof decking. Louisiana-Pacific, the bigger of the two companies, offers a broader range of building materials for the residential and nonresidential markets, including software design products.

If Louisiana-Pacific and Ainsworth had tried to proceed with the transaction as originally proposed in the face of regulatory objections, that would typically prompt the regulators to take the companies to court to try to block the transaction.

Ben Dummett contributed to this article.

Write to Judy McKinnon at judy.mckinnon@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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