Abitibi, Bowater merging to create forestry giant
Last Updated: Tuesday, January 30, 2007 | 7:32 AM ET
Forest products companies Abitibi-Consolidated Inc. and Bowater Inc. said Monday their planned merger should return them to profitability in an industry that's had its share of red ink and mill closures.
The companies said their merger will result in the third-largest publicly traded paper and forest products company in North America.
John Weaver, president and CEO of Abitibi-Consolidated shown in April 2005, would become executive chairman of a merged AbitibiBowater firm if it gets regulatory and shareholder approval.
(Ryan Remiorz/Canadian Press)
The new company would control almost half of the North American newsprint market, by some estimates. The deal still requires regulatory and shareholder approval.
Both companies have posted large losses in recent years. Newsprint prices have slumped amid falling demand as circulation drops and the size of papers shrinks.
The new company would have annual revenues of about $9.3 billion, the two businesses said in an announcement before the opening of stock markets.
The companies are calling their proposed all-stock deal a merger of equals. The new firm, which would be called AbitibiBowater Inc., would have its headquarters in Montreal — the current home of Abitibi. The new company would also retain a regional manufacturing and sales office in Bowater's home of Greenville, S.C.
|Fort Frances, Ont.||Pulp and paper||698|
|Grand-Mère, Que.||Commercial paper||617|
|Alma, Que.||Commercial paper||545|
Abitibi president and CEO John Weaver would become executive chairman of the new firm, while David Paterson, Bowater's chairman, president and CEO, would become president and CEO. Each firm will have seven of the 14 seats on AbitibiBowater's board of directors.
Under terms of the deal, current Bowater shareholders would wind up with 52 per cent of the equity in the new company, while Abitibi owners would hold the remainder.
Bowater shareholders would get 0.52 of a share in the new firm for each of their current shares. Each Abitibi share would be exchanged for 0.06261 of a new AbitibiBowater share.
In heavy volume with more than 53.7 million shares traded, Abitibi hit $3.94, up 83 cents on the TSX. Bowater shares were up 24 per cent, climbing $5.29 US to reach $27.44 US on the NYSE.
Forest products market has been tough
The market for forest products in recent years has been difficult, evidenced by a slew of closures of pulp, paper and lumber mills. Paterson alluded to those conditions as a reason for the merger.
"This a logical strategic step to address the realities of today's marketplace," he said.
The merger proposal comes as Abitibi-Consolidated has launched a new round of cost-reducing moves. For instance, managers and unionized workers at its mill in Grand Falls-Windsor, N.L., have been asked to find $10 million in annual savings by March.
It's expected the merger would save the companies about $295 million annually. The firms did not say if the merger would result in layoffs or plant closures.
The merged firm would own or operate 32 pulp and paper facilities, plus 35 wood product facilities in Eastern Canada and the southeastern United States.
|Thunder Bay, Ont.||Newsprint, pulp and paper||952,000 tonnes/year|
|Catawba, S.C.||Coated mechanical paper||894,000 tonnes/year|
|Calhoun, Tenn.||Newsprint||889,000 tonnes/year|
|Coosa Pines, Ala.||Newsprint||585,000 tonnes/year|
|Gatineau, Que.||Newsprint||476,000 tonnes/year|
A union representing forestry workers said the move by Abitibi and Bowater should cause concern in government and community circles.
"There are many issues underlying this announced merger which should raise alarm bells in Ottawa," said David Coles, president of the Communications, Energy and Paperworkers Union of Canada. "Our forest-based industries and communities are already in crisis with the loss of some 10,000 jobs over the past few years.
"Our history with mergers and acquisitions has been that so-called 'synergies' really mean more mill closures, job losses and devastation in our communities," he said.
The union called on Prime Minister Stephen Harper to convene a national summit on the future of the forestry industry.
The companies said their prediction of $295 million in synergies does not depend on closing more mills.
"Those synergies are based on reductions in costs throughout the system but not predicated on any mill closures," Bowater's David Paterson told a news conference.(With files from the Canadian Press)
Top News Headlines
- Search continues for 2 missing New Brunswick fishermen
- A search effort has resumed for two missing fishermen off the coast of New Brunswick, after a distress call was issued from their boat early Saturday. more »
- Jeep driver apologizes after stunt kills Edmonton woman
- A man claiming to be the driver of a Jeep that struck and killed a spectator at a charity event in Edmonton says he is sorry for what happened. more »
- Senior Pakistani politician shot dead
- Gunmen in Pakistan have killed a senior member of Imran Khan's Movement for Justice (PTI) party outside her home in Karachi. more »
- Virginia parade crash driver likely had medical problem
- Authorities believe the driver who plowed into dozens of hikers marching in a Virginia mountain town parade suffered from a medical condition and did not cause the crash intentionally, an emergency official said Sunday. more »
Latest Business Headlines
- 1 year later, Facebook stock remains below IPO price
- A year after Facebook's high profile IPO, investors are still skeptical about its prospects and the stock price is wallowing. more »
- IRS's integrity at stake in scandal over screening of conservative groups
- Unloved in the best of times, the Internal Revenue Service will have to scramble to convince U.S. lawmakers and the public that its intentions were pure, not partisan, when it subjected groups affiliated with the Tea Party movement and other conservative causes to special scrutiny. more »
- GM shares close above IPO price for 1st time in 2 years
- Shares of General Motors reached an important milestone on Friday, closing above their initial public offering price of $33 US for the first time in more than two years. The day wasn't bad for GM's rivals either, with Ford shares closing above $15 for the first time since May 2011 and Toyota, Honda and Nissan all hitting 52-week intraday highs. more »
- AECL to cost $236M more than expected this year
- A new report from the parliamentary budget officer shows Atomic Energy of Canada Ltd. continues to be a drain on the public purse and will cost an additional $236 million this year. more »
Lang & O'Leary Exchange
The data on this site is informational only and may be delayed; it is not intended as trading or investment advice and you should not rely on it as such.
- Harper chief of staff resigns amid Senate expense scandal
- Spectator killed at Edmonton Jeep event
- Car drives into crowd at Virginia parade
- Toronto Mayor Rob Ford cancels weekly radio show
- Email is proof Senate greenlit expenses, Brazeau says
- Senior Pakistani politician shot dead
- Winning ticket sold in Florida for $590M Powerball jackpot
- Rescue attempt over for New Brunswick fishermen
- Astronaut Chris Hadfield adjusts to 'earthling' life