By Dow Jones Business News,
May 14, 2014, 02:25:00 PM EDT
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
The news sent the shares of Vancouver-based Ainsworth down 9.3% to 3.13 Canadian dollars($2.89) in Toronto Stock
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
Ben Dummett contributed to this article.
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