Gunns accepts $23m compo deal

ABC News (Australian Broadcasting Corporation), September 14, 2011

The Tasmanian timber company, Gunns, has reached an agreement with the State Government on compensation.

Gunns has formally accepted an offer of $23 million to abandon its residual native timber rights.

State-owned Forestry Tasmania will also be paid $11.5 million to ensure it does not on-sell the native forest contracts.

The Premier, Lara Giddings, says the payment is necessary as the Government is not able to direct FT to extinguish the contracts.

Ms Giddings says the payments will also settle the dispute between FT and Gunns over an alleged $25 million debt.

The Government's original offer rejected by Gunns was for $23 million to be split equally between Gunns and FT.

Gunns will update the stock exchange tomorrow on the details of the agreement and the implications for the company.

Its shares have been suspended from trading for more than a month, pending an outcome of negotiations.

Ms Giddings says the deal aims to avoid the possibility of lengthy court action.

"We have resolution of issues that must be resolved in order for the Inter-Governmental Agreement (IGA) to progress."

"That of course is step one, that Gunns step out of the native forest industry and the $23 million enabled that to happen.

"They did have residual contractual rights that the Solicitor-General told us we needed to settle.

"Similarly, if we did not settle these issues with Forestry Tasmania, these contracts could otherwise have been on-sold and therefore wouldn't be available for verification of conservation outcomes.

"This resolution means that we have avoided the lengthy delays and costs that would inevitably be incurred if these issues were pursued through the courts," the Premier said.

The Forest Contractors Association has welcomed the agreement.

Spokesman Ed Vincent says he hopes it means contractors will soon be able to apply for grants from the $45-million industry exit assistance package.

"I think realistically it is going to take a few weeks before contractors actually receive any approvals."

"There'll need to be an application process gone through but hopefully that application process will be announced within the next few days.

"From our point of view, it's essential that that be reached to provide some surety for the contractors who are looking to progress the exit package under the IGA so that they can actually retire out of the industry with some dignity," he said.