Abitibi/Bowater to Join in Merger of Equals

Includes: ABY-OLD, BOW
by: SA Eli Hoffmann

Abitibi-Consolidated Inc. and Bowater Inc. said this morning they would merge in a joining of equals, making them the No. 8 publicly traded global forest-products company, and 3rd in North America. The new company, AbitibiBowater, will be held 52% by Bowater's shareholders and 48% by Abitibi's; Abitibi Bowater Chart 29 1 07each Abitibi share will be exchanged for 0.06261 share of the new company, and each Bowater share will get 0.52 share. This reflects their diverse share prices: Abitibi's closed Friday at $2.64, while Bowater closed at $22.15. The companies said they expect to save US$250 million annually, notwithstanding their respective efficiency drives. Abitibi shares traded up $0.51 (19.3%), and Bowater shares traded up $1.85 (8.35%) in pre-market trading.

• Sources: Press Release, MarketWatch
• Related commentary: Abitibi's Better Than It Looks on Paper - Barron's, Abitibi: Ugly Paper Duckling Can Become a Swan, Trees and Paper: The Rodney Dangerfield of Commodity Stocks
• Potentially impacted stocks and ETFs: Abitibi-Consolidated Inc. (ABY-OLD), Bowater Inc. (BOW). Competitors: International Paper Co. (NYSE:IP), Kimberly-Clark Corp. (NYSE:KMB), Meadwestvaco Corp. (MWV), Domtar Inc. (DTC), Potlatch Corp. (NASDAQ:PCH)

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