Abitibi Bowater Merger

Abitibi Bowater Merger was a significant incident as it generated a global leader in the forestry products and paper products industry of the world. After the merger, the two companies Abitibi and Bowater gained in terms of market share, in terms of revenue and also in terms of falling cost of production.

Abitibi Bowater Merger resulted in formation of a forestry giant and a global leader in paper products manufacturing. This merger took place between Abitibi of Canada and Bowater of South Carolina. After merger, the combined company Abitibi Bowater became the third largest publicly traded paper and forestry products company in North America. The Gains from Merger It was expected that the merged Abitibi Bowater Inc. would generate an annual revenue as high as $7.9 billion. The combined company aimed to achieve a market capital of $2.4 billion after the merger.
Expectations were that the merger would help to lower the production cost, marketing cost and administrative costs through through gaining efficiency in production,distribution and procurement. It was estimated that the merged firm Abitibi Bowater would be able to reduce annual production cost by $250 million. The Reason of Merger The two companies took the merger decision in order to strengthen the operational side and financial base which would enable them to compete in the global platform. The decreasing demand for newsprint in North America was becoming a rising concern of these two companies and they felt the need to enter into the global competition. As a result, the merger deal was finalized. The Merger Process Although the Abitibi Bowater Merger was announced in January,2007, the merger deal was finally executed in October,2007. In the merger deal it was decided that, Abitibi President and CEO John W. Weaver would become the Executive Chairman of the combined company, whereas, Bowater President, Chairman and CEO, David J. Paterson would become the President and CEO of the merged firm. According to this all-stock merger deal, the shareholders of Abitibi were entitled to receive 0.06261 common share of Abitibi Bowater, while the shareholders of Bowater were entitled to get .52 common shares of Abitibi Bowater.