An Indian sandalwood company with plantations in Western Australia's Kimberley region has been bought by global forestry giant Mercer International, for an undisclosed sum.
The NASDAQ-listed Mercer runs a number of timber operations and pulp mills in Canada and Germany, producing around 1.5 million metric tonnes of pulp each year.
Its acquisition of Santanol Group, which was finalised this week, includes 2,500 hectares of plantations in the Kimberley's Ord Valley, a processing facility in Kununurra, and an oil distillation and refining facility in Perth.
Mercer's chief executive, David Gandossi, said the sandalwood industry had a big future, especially in the fragrance market.
"There are a few other pockets around the world where there's some harvestable sandalwood but not nearly enough to meet global demand," he told ABC Rural.
"Sustainably grown legal sandalwood is becoming more and more sought after by a number of very important fragrance and aroma types of businesses.
"We believe Santanol provides a great platform for growth and stability of Indian sandalwood [oil] for that market."
Room to grow
The Santanol takeover comes at a turbulent time for the sandalwood industry in northern Australia, with major competitor Quintis falling into administration in January.
Santanol has had its own internal troubles, with the company put on the market in May following disagreements between the company's major investor, global equity firm KKR, and some of the minority shareholders.
The issues and controversy has not phased Canada-based Mercer International, and Mr Gandossi believed there was room for expansion.
"Santanol owns all of its own trees, there's no financial complexity with growers and that kind of thing," he said.
"We are our own ship, we grow our own trees, we process them into oil, we've got a team that can deliver a finished product to the markets.
"So any of the other stuff that's happening in the [Ord] Valley from our perspective is either a distraction or in some ways an opportunity for Santanol.
"Our interest from Mercer, is that this [Santanol Group] will become a subsidiary of our company, which we will support and provide capital to facilitate growth and expansion."
The sale is not expected to affect day-to-day operations or staffing at Santanol's plantations in Kununurra, with current CEO Remi Clero staying on board to manage the company into the future.
Speaking to ABC Rural from his office in Paris, Mr Clero said Santanol had "found a home".
"There's an industrial player that's now here for the long-term, this is not a speculative investment and I can see there's a desire to grow and invest," he said.
"It's the right outcome for a company like Santanol and the right outcome for the industry at large."
Mr Clero said the sale had received approval from Australia's Foreign Investment Review Board.
Santanol is the world's second-biggest producer of Indian sandalwood.
