The Government has approved a £4 million takeover by the Stateowned forestry company, Coillte, of the Northern Ireland sawmilling company, Balcas. However, the deal is to be submitted to the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, who is likely to refer it to the Competition Authority, according to sources.
Coillte is now looking at several possible acquisitions in eastern Europe on the back of the takeover, the first commercial acquisition in its history.
Under the deal, Coillte will acquire 80 per cent of Balcas, which has an annual turnover of £40 million and employs 800 people.
Last night, the Irish Timber Council (ITC) said it deplored the Government's decision. The takeover was "completely contrary to the principles of fair competition", it claimed.
It said the possibility of a referral to the Competition Authority showed there were problems with the takeover.
The ITC claims the acquisition is a conflict of interest for Coillte. It will mean, it says, that the monopoly supplier of sawlog to the sawmills will also control its largest sawlog customer, Balcas.
"The decision is particularly galling at a time when Coillte's new timber sales system is proving totally inadequate in meeting market trends," said chairman, Mr Peter Wilson.
Balcas is one of the largest sawmilling companies in Ireland. It has sawmills in Enniskillen in Fermanagh, Newtowngore in Leitrim, Magherafelt in Derry and in Estonia.
It also operates a mouldings operation in Co Kildare and a pallet manufacturing operation in Belfast. The Duke of Abercorn owns 80 per cent of the company, with the remainder owned by the Kidney family, who run the sawmilling operation and intend to retain their stake.
It is understood some ministers were reluctant to approve the takeover and many had been lobbied strongly by the ITC.
The Minister for the Marine and Natural Resources, Dr Woods, said the approval was "subject to certain safeguards".
The department refused last night to give any information on how the safeguards might operate, although a meeting is being set up with both Coillte and the ITC to discuss some of the issues involved.
Coillte said it was pleased with the Government's decision, which had been postponed on several occasions.
According to Coillte, the taking of the stake is "major commercial opportunity for the company to integrate its business as envisaged in the Government strategy document, Growing for the Future".
