Environmentalists are being blamed for the dumping of a deal to sink $150 million into Tasmanian timber company Gunns.

Gunns has notified the stock exchange that potential investor, Richard Chandler Corporation, has pulled out of its bid to buy a 40 per cent stake in the company.

Gunns CEO Greg L'Estrange says public statements from environmental movement leaders may have undermined the deal.

"If you look at the type of public comments that's been made by prominent figures over the last few weeks, it's not a situation that is encourage investment in the state of Tasmania."

Gunns' shareholders were due to vote next month on the Singapore-based company's $150 million offer.

The deal was widely seen to be crucial for the company to shore up plans for its $2.3 billion Tamar Valley pulp mill project.

Mr L'Estrange says the company could sell its stake in the project.

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"We've been trying to work through this process from the point of view of doing it within a framework of governance and compliance and plantation base but if we have an offer from someone who doesn't want to have all of those parts of their investment criteria, of course we'll look at it, we'll look at it," he said.

"This facility will be built, it will be built on the Tamar Valley site, it will go ahead. Whether Gunns is part of that, or not, is not something I can guarantee.

"I am not withdrawing. Our shareholders would receive a value for that investment if they decided to go down that path."

Mr L'Estrange says the project would make an attractive investment.

"Someone may well have the cash and be within the sector to take on this facility."

"There are few places in the world which have a pulp mill ready to build with a plantation based around it, with a wood resource around the facility," he said.

He maintains the company is in a strong financial position and the dumped deal has not changed the status of the pulp mill project.

"We remain very confident that we will have the project across the line. We are encouraged by the reaction from our key investors today and we're hopeful of coming with an alternate structure in this process."

Shadforths Investment Group's Matthew Torenius says the Chandler Corporation withdrawal is a major setback for Gunns.

"The prospect of a cornerstone was going to be a positive in terms of Gunns pushing forward with the pulp mill," he said.

"This really does open the question now as to how Gunns is going to repay its debt and whether there are any other investors that may be willing to put up funds.

"In terms of their ability to raise funds, I would say they are running out of options."

Gunns shares have been placed in a trading halt for two days.

Disappointing

Tasmanian Premier Lara Giddings says the withdrawal is disappointing.

"I would have hoped that with the strength of the majority of the State Parliament being behind the pulp mill, and Gunns the company, that they might have had some confidence to be able to go ahead," she said.

Ms Giddings says the corporation had not signalled an intention to pull out when she met representatives late last month.

The Premier told The World Today that groups opposed to the pulp mill project also met the company.

"I believe it certainly is concerning that it would seem as if some of the meetings that they have held with environmental groups in this state have had an impact on their thinking."

"This is quite alarming, I think, for big business across Australia in terms of their role and what can be undermined by small minority groups."

Tasmanian Greens Senator Christine Milne also thinks those meetings have had an impact on the company.

"They found that not only had this whole pulp mill project had a corrupted approval process but that the level of community opposition was enormous and that there was no social licence to operate," she said.

"Now if the Chandler Corporation is actually serious about transparency and ethical governance that would have been a major problem to them."