UPDATE 1-Louisiana-Pacific takeover of Ainsworth Lumber falls apart

Wed May 14, 2014 6:13pm EDT
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(Adds details, background, analyst comment, share price move)

May 14 (Reuters) - Louisiana-Pacific Corp has backed away from its planned takeover of Ainsworth Lumber Co, blaming the split on demands for more asset sales from Canadian and U.S. regulators, the companies said on Wednesday.

Tennessee-based Louisiana-Pacific said last September it would buy its Canadian peer for about $1.1 billion, including debt, in a push to expand into Asia and other international markets.

Ainsworth's shares on the Toronto Exchange closed 8.7 percent lower at C$3.15 following the news, while Louisiana-Pacific's stock fell 4.6 percent to end at $15.13 on the New York Stock Exchange.

The proposed deal faced opposition from antitrust regulators on both sides of the border. Earlier this month, the companies had warned that regulators were threatening to block the deal failing guarantees around asset divestitures.

The companies said they had contemplated a legal battle to push ahead with the planned combination, but decided against that course of action due to the costs and risk of prolonged litigation.

UBS analyst Gail Glazerman said the collapse of the deal does not come as a surprise.

"As the regulatory review dragged on, closing on announced terms appeared increasingly unlikely," said Glazerman in a note to clients, adding that Louisiana Pacific had already indicated that increasing disposals might have involved renegotiation of the value of the deal.

The U.S. Department of Justice said in a statement that the deal would have substantially lessened competition in the market for the production of oriented strand board (OSB) sold to customers in the Pacific Northwest and Upper Midwest regions of the United States.   Continued...