Paper Manufacturers Abitibi, Bowater to Merge

In a deal that will create the third largest public paper and forest products company in North America, Montreal-based Abitibi Consolidated and Greenville, SC-based Bowater today agreed to combine companies in an all-stock merger of equals.

To be known as AbitibiBowater, the combined company will have annual revenue of approximately $7.9 billion.

“This is definitely a large deal,” says Michael Wade, director of sales and marketing at Deerfield, IL-based distributor Wade Paper Corp. “What the effect will most likely be is reduced capacity in the newsprint arena, which is of little or no concern to most catalogers. This could also result in some coated and uncoated groundwood machine closures, which would have more of an effect on catalogers. Both Abitibi Consolidated and Bowater have significant market share in coated groundwood, uncoated groundwood, and newsprint.”

John Maine, vice president of Bedford, MA-based forest industry research group RISI, says the “primary impact” of the deal will be on newsprint and super-bright, uncoated mechanical specialties, “which don’t tend to be used in too many catalogs.” The effect on the coated paper market, he says, will be minimal since Abitibi doesn’t participate in that category.

John Weaver, president/CEO of Abitibi Consolidated, will serve as executive chairman of AbitibiBowater; David Paterson, chairman/president/CEO of Bowater, will serve as president/CEO of AbitibiBowater. AbitibiBowater’s headquarters and executive offices will be in Montreal, with a U.S. regional manufacturing and sales office in Greenville. The company, which will be incorporated in Delaware, will apply to list its shares on the New York and Toronto stock exchanges.

The merger is expected to generate approximately $250 million in annual cost synergies from improved efficiencies in areas such as production, selling, general and administrative (SG&A) costs, distribution, and procurement.

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