Soon-to-be-married papermakers Abitibi and Bowater received shareholder approval for their merger last week, despite a modicum of dissent earlier on. Third Avenue Management, which owns a 12% stake in Abitibi, figured the deal was unfair to Abitibi shareholders, who will end up owning 48% of the combined entity while Bowater holders receive a 52% stake. Indeed, the distribution seems questionable when you consider that Abitibi has more assets to contribute, but apparently most shareholders believe the inequity is offset by potential financial improvements.
The combined AbitibiBowater will become a top 10 global paper company and a top 5 player in North America. Through the merger, Abitibi and Bowater expect to save $250 million in costs and have combined revenue of $8 billion. While the deal will likely ease the companies’ suffering from lower demand for newsprint and other paper types, that trend will continue to create challenges even for a larger market player.
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