Nashville, Tenn.-based Louisiana-Pacific (LP) and Ainsworth Lumber in Vancouver, B.C., on May 14 cancelled plans to merge because of hurdles imposed by U.S. and Canadian regulators.

The boards of both companies had agreed to combine operations in September 2013, but needed government approval for the $1.1 billion deal to go through. U.S. Justice Department and Canadian officials were concerned that the combined firm would have too much control over prices of oriented-strand board (OSB) and engineered-wood products in Canada.

According to the U.S. Justice Department, the companies represent two of only four major producers selling OSB into the Pacific Northwest, and two of only three OSB makers selling into the Upper Midwest. The combined company would have dominated the Pacific Northwest region with a 63% market share, and the Upper Midwest with a 55% share.

The merger would have increased the companies’ relative market power, while eliminating head-to-head competition between them. According to the Justice Department, in 2013, LP had net sales of $2.1 billion, of which more than half, $1.1 billion, came from the OSB segment. Ainsworth had 2013 sales of C$488 million, all from OSB production.

“By gaining control over Ainsworth’s mills, LP would have been in a better position to restrict the amount of OSB supply available in these regions, and to coordinate output and price decisions with its few remaining principal competitors, driving prices above competitive levels,” the Justice Department said.

The companies decided the merger was in the cards unless they agreed to divest of some significant assets, assets that made the deal worthwhile. Also, they faced a long, costly, and possibly fruitless legal fight with U.S. and Canadian regulators to win approval.

LP CEO Curt Stevens said, “We believe this transaction would have led to positive outcomes for customers, employees and shareholders, and fundamentally disagree with the analysis by antitrust agencies of the competitive dynamics of our industry.”

Ainsworth CEO Jim Lake also expressed disappointment in the outcome of the regulatory process.