Aug 31, 2009. /Lesprom Network/. Australia's biggest forestry group, Gunns, is expected to unveil a new timber buyout in tandem with its annual results announcement, The Australian Business reported. Gunns' shares were put in a trading halt late last week pending what company secretary Wayne Chapman described as "a possible acquisition". The most likely scenario is an agreed bid or deal involving fellow Launceston-based group Forest Enterprises Australia, in which Gunns recently took an 18% stake. It is in the same business as Gunns, which has been criticised for not having enough plantation timber to supply its planned Bell Bay pulp mill in northern Tasmania. Without an adequate supply of plantation timber, Gunns would be forced to use older native trees as feedstock, defying long-term pressure from the green movement. The price of the likely target company's shares jumped by 15% on Friday, from 19.5c to 22.5c. Since late July the price has climbed by 68 per cent from 14c. The key to any FEA deal would be the reaction of 30 per cent shareholder Integrated Tree Cropping, a subsidiary of Elders, previously named Futuris. Elders has said it intends to continue in the timber business, and it effectively has two timber arms in ITC and FEA. Any disposal of FEA would still leave a timber presence through ITC. ITC itself may be involved directly in a deal with Gunns since it recently stated it was aiming to do a sale and leaseback arrangement of 47,000 ha of land it now owns. Elders may not have a lot of choice since it is under strong pressure to realise as much cash as possible to reduce or refinance its heavy debt burden. Late last month, Elders sold its insurance division to QBE in a deal bringing in $270 million of much-needed cash. In June, the company said its lenders had agreed to extend repayment obligations until September 30 as the company sought to refinance debt facilities of $1.1 billion. If Elders sold out of FEA at a 20 per cent premium, it would bring in a further $35 million. One strongly mooted scenario is a sale of its 40 per cent interest in Elders Rural Bank, the balance being held by Bendigo and Adelaide Bank. Gunns is also known to be interested in buying into forestry assets in defunct group Timbercorp but that formal sale process is still under way. Timbercorp spokesman Matt Trewin said yesterday that the liquidators, KordaMentha, had "an expressions-of-interest process in train that has attracted more than 20 interested parties". Bids are due in by September 18 and the process should be finalised by September 30. No early bids had been received. Aside from having extensive timber interests in Tasmania, Gunns has about 50,000ha of plantation timber in the green triangle that straddles the border between South Australia and Victoria. Timbercorp controls, but does not own, about 30,000 ha in the same region. Gunns, whose shares hit a recent high of $1.145 on Thursday before trading was halted, is expected to announce a slight drop in profit for the year to June 30. Deutsche Bank has predicted a 14% fall to $65.3 million.