Merger approved but hurdles remain
July 31, 2007 By Pulp & Paper Canada
The biggest hurdle has been overcome, but several challenges remain to the successful implementation of the Abitibi…
The biggest hurdle has been overcome, but several challenges remain to the successful implementation of the AbitibiBowater merger.
Abitibi-Consolidated and Bowater shareholders both voted in approval of the merger, however, as a recent report by Forestweb noted, difficulties imposed by overseas competition, labour negotiations, debt, fibre and energy costs, all compounded by the tireless strengthening of the Canadian dollar, are sure to serve as stumbling blocks along the path to consolidation.
Theoretically, the company should be better able to manage excess production capacity and inventories, the Forestweb report said. By combining, the two companies hope to realize annual synergies of US$250 million within two years.
The new company will start off with a total of 32 pulp and paper mills and 35 wood product facilities. There is concern whether or not the sheer size of AbitibiBowater will be too big to compete with more efficient Asian and European facilities. Further complicating matters are looming expiration dates for collective agreements, and as Forestweb highlighted, the company is expected to push for concessions. A heavy debt load is also a matter of contention.
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