The Government is likely to approve the acquisition by Coillte of the Northern Ireland sawmill company, Balcas, for approximately £4 million, according to industry sources.

The acquisition is opposed by the Irish Timber Council (ITC), which says the takeover would be an abuse of a dominant position.

The acquisition requires the approval of the Minister for Finance, Mr McCreevy and the Minister for the Marine and Natural Resources, Dr Woods. It is understood a decision on the issue will be made at next Tuesday's Cabinet meeting.

Coillte plans to take an 80 per cent stake in Balcas, which has plants in Enniskillen, Co Fermanagh, Magherafelt, Co Derry, Kildare, Newtowngore, Co Leitrim, Belfast and Estonia and is owned by the Duke of Abercorn.

If the Government approves the acquisition, the ITC intends to make an official complaint to the Competition Authority.

According to Coillte, the taking of the stake is a "major commercial opportunity for the company to integrate its business as envisaged in the government strategy document, Growing for the Future.

Balcas accounts for 50 per cent of all timber exports coming from Coillte's forest operations. "The reality is that if Coillte is allowed to purchase a controlling interest in its largest customer, the potential for the company to abuse its dominant position is overwhelming," said Mr Peter Wilson, of the ITC.

According to Mr Martin Lowery, chief executive of Coillte, the Republic's log supply is increasing every year, so the emphasis in the industry should be on exporting.

"Working with Balcas will provide an export avenue, and without such avenues, jobs in the Irish saw-milling industry will be at risk," said Mr Lowery.

The ITC does not accept there is an oversupply of timber stocks, and says shortages have resulted in sawmills "paying the highest price in Europe for their timber".

Coillte says it sells its timber through public auction, which is monitored independently by KPMG. Coillte denies a claim by the ITC that it intends to spend £20 million on a new mill at Enniskillen. It says any plans to update any mill are not part of the acquisition of Balcas.

Agricultural policies are creating a shortage of land for forestry, Dr Brendan Kearney, an economic consultant, has told a meeting of the Irish Forestry Chain. He said policies initiated at EU level were jeopardising the Government's official target of 25,000 new hectares each year.