Pulp and Paper Canada

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Where forestry giants collide


January 30, 2007
By Pulp & Paper Canada

It’s being touted as a merger of equals.

It’s being touted as a merger of equals.

The decision to join together two of the biggest North American forest products companies, Abitibi-Consolidated and Bowater, will position the joined enterprise as the third largest paper and forest products player in North America, and the eighth largest in the world. The new AbitibiBowater is expected to generate annual revenues of roughly $9.3 billion.

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“It’s a tough marketplace we’re operating in, and we needed to create a more viable company,” David Paterson, current president and CEO of Bowater, and incoming CEO of the new company said at a press conference held in Montreal the morning after the announcement.

“But we believe there are no two companies in this industry that are as similar as our two. There are synergies there that will drive our financial improvement and flexibility.”

Together, AbitibiBowater will own a total of 32 mills, staffed by 20,000 employees. The new company’s footprint will stretch across roughly 70 countries, but the bulk of its business will be primarily North American.

Although Paterson did concede that with plans to station the head office in Montreal, there would inevitably be executive management layoffs in Greenville, SC, that the merger was “not predicated on any mill closures. There will be an obvious overlap at the executive level, with redundancies there.”

Concern was expressed at the fates of several mills, in particular St. Flicien, Dolbeau, Donnacona and Mersey. Paterson offered equal assurance to all four facilities. “As Bowater, we feel good about Quebec, and we want to invest here, but we need a lower cost format to do so. We’re looking at our operations, and trying to find a more competitive structure to operate in. We’re in this together, it really isn’t a company versus employee issue. It’s really about getting these mills back to making a profit. Mersey has actually done quite well and I’m proud of that facility.”

With regards to the situation at Dolbeau and Donnacona, Paterson referred to newly structured labour contracts which have allowed for a certain amount of corporate breathing room, thus improving the future of those mills.

In response to queries about potential challenges imposed by U.S. antitrust regulations, Paterson was equally confident, claiming, “we are in the process of contacting regulators now, and I feel confident that we will meet all regulations. I believe it will pass.”

“It’s an exciting and an important day,” Abitibi Consolidated CEO and future executive chairman of AbitibiBowater John Weaver said. ” This transaction will enable us to move forward, to improve our product offering, our efficiency and will serve to strengthen both our companies. It truly is a merger of equals.”


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