Abitibi/Bowater Merger Update

At this relatively early stage of the HSR second request process, Abitibi (ABY) and Bowater (BOW) are unwilling to provide any useful information on the current progress with the FTC. As it has been a month since the second request, it can be assumed that a substantial portion of the market data has been submitted and the FTC is now (or very near) in the process of singling out specific geographic areas of concern.

Again, we will refer to the 2001 Alliance (PFA) - Bowater (BOW) deal in which the FTC review lasted just over four months, resulting in unconditional HSR approval. While this case probably will not go through without at least some minor concession(s), the timing of the FTC review should be somewhat similar. Of course, this assumes that the companies have been responding to the second request efficiently, as suggested above.

It remains the opinion of this publication that the companies can obtain FTC consent if they work in good faith with the regulator from day one and if they offer a divestiture or two, rather than forcing the FTC into demanding concessions further along in the review process. If the companies take the friendly/open approach, HSR clearance and deal completion is likely to occur before the end of September 2007.

With respect to the Competition Canada review, the companies will neither confirm, nor deny that the Competition Bureau extended its review on April 2. Given the magnitude of this deal, particularly among Canadian labor groups, it would be extremely surprising if the Bureau did not extend its review. Thus, it must be assumed that the Competition Canada review remains a pending matter at this point and the review will most likely continue for the next few months.

A BOW official claims the company "may provide an update" on the review processes during next Thursday's conference call, but at this time will not comment on the FTC and Competition Canada reviews.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.