Gunns Ltd’s proposed $1.5 billion pulp mill in the Tamar Valley is shaping up as a big federal election issue after the cowboy tree lopper walked away from the tortuous approval process put up by the federal and state governments.

The pulp mill review process appears to have been a complete debacle, especially when you compare it with Bob Carr’s generous deal to get Dick Pratt’s Tumut mill up and running a few years back. It is clear that a decision needs to be made one way or the other – a two-year review is an absolute joke. That said, Paul Lennon’s kow-towing to Gunns is a dreadful look and the company hasn’t been overly helpful in providing timely information.

It’s worth noting exactly who are the largest shareholders in Gunns:

Perpetual: 14.85%

Concord Capital: 11.79%

Suncorp: 7.2%

John Gay: 5.27%

Deutsche Bank: 5.14%

Morgan Stanley: 5.06%

Capital Group: 5.04%

Executive chairman John Gay runs the company as if he owns a majority of the shares when, truth be known, he is completely beholden to the six largest instituational shareholders who together control 49%. It’s time this group stood up and took a position.

Perpetual’s senior portfolio manager Matt Williams emailed last week to say the funds management giant “fully support Gunns and their operations in Tasmania”.

Yes, but what about the company’s appalling corporate governance? Why don’t the institutions insist on an independent chairman? How can they support the scatter gun litigation against politicians and green activists alike when it appears to be a dreadful waste of shareholder funds that has so far only yielded embarrassing legal rebuffs?

Gunns shares have leapt from $2.72 to a four-week high of $3.05 since the withdrawal decision on 14 March, pushing the company’s market capitalisation back above $1 billion. Whilst some have interpreted this as confidence about an expedited approval process, others believe Gunns is far more valuable without all the risks associated with the project.

It’s not often that a $1 billion company attempts a $1.5 billion project so there would have to be some serious debt and equity capital raised. A dodgy approval process from a discredited Tasmanian Labor government would crank up the political, environmental, financial and reputational risks for all concerned. And that includes the passive institutions who need to take a more active interest in developments.

Peter Fray

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