By: E&P Staff
Abitibi-Consolidated Inc., Montreal, and Bowater Inc., Greenville, S.C., announced Wednesday their proposed executive team to lead AbitibiBowater Inc., pending approval of the companies’ proposed combination and appointment by the merged company’s board.
Abitibi President and CEO John W. Weaver already was announced as the intended executive chairman of the new company, responsible for all corporate functions. David J. Paterson, now Bowater chairman, president and CEO, is to serve as AbitibiBowater president and CEO, primarily responsible for operations and sales.
“Our first priority is to deliver at least US$250 million in synergies, which will create significant value for investors. We are confident that this executive team will deliver on the synergy commitment,” Weaver said in a statement.
The same announcement quotes Paterson saying, “We expect to have enhanced financial flexibility, increased cash flow and a better opportunity to unlock future value.”
AbitibiBowater will be organized as four primary businesses: North American Newsprint, International, Commercial Printing and Coated Papers, and Wood Products – each with bottom-line responsibility for all aspects of operations and sales.
Among the nine other members of AbitibiBowater’s executive team, Bowater Chief Financial Officer William G. Harvey will work in the same capacity as an executive vice president; Abitibi International Newsprint Sales Vice President Jon Melkerson becomes senior vice president, business and corporate development (including the recycling and energy businesses); Abitibi Senior Vice President, Corporate Development and Chief Financial Officer Pierre Rougeau moves to senior vice president, North American newsprint business; Abitibi Senior Vice President, Newsprint, Thor Thorsteinson is named senior vice president, international business (including newsprint); Bowater Executive Vice President, Operations and Process Improvement, W. Eric Streed will be senior vice president, supply chain, (IT, customer service, logistics and procurement).
AbitibiBowater will be the third largest publicly traded paper and forest products company in North America and the 8th largest in the world. Abitibi-Consolidated manufactures newsprint and commercial printing papers and produces other wood products from 45 operating facilities in 70 countries. Bowater produces coated and specialty papers and newsprint. It also sells bleached market pulp and lumber products. The company’s 12 pulp and paper mills in the United States, Canada and South Korea employ approximately 7,000 people. Bowater also operates one converting facility and owns 10 sawmills. Operations are supported by approximately 763,000 acres of timberlands owned or leased in the United States and Canada and 28 million acres of timber-cutting rights in Canada.
Both companies are among the world’s largest paper recyclers. Bowater consumes large quantities of recovered newspapers and magazines at its six North American recycling plants. Abitibi diverts approximately 1.9 million metric tons of newspapers and magazines annually from landfills.
The day before the proposed executive team was announced, independent proxy advisors Institutional Shareholder Services Inc. and Glass Lewis & Co., recommended that Abitibi-Consolidated and Bowater shareholders vote in favor of the proposed combination. On Monday, however, Abitibi’s largest shareholder, New York-based investment adviser Third Avenue Management LLC, announced its opposition to the merger and said it intends to vote its shares against the merger at the July 26 special shareholder meeting.
ISS said its review of the transaction’s terms, particularly the strategic rationale and positive market reaction, led it to “believe that the merger agreement warrants shareholder support.”
“Given the rationale of consolidation in the companies? industry, “Glass Lewis, stated, the scale afforded by the merged company’s size “will afford AbitibiBowater substantial costs savings.”
But while Bowater’s Paterson said the merger would produce “a financially stronger company that can more effectively compete and deliver significant benefits to our stakeholders,” Third Avenue Management Portfolio Manager Amit Wadhwaney said in a statement that the combination “is not in the best interests of Abitibi shareholders.”
While Abitibi would be contribute more assets, Wadhwaney said, its shareholders will get “a minority of the value of the combined company.” He said those shareholders will do better if management instead takes advantage of “opportunities to improve operating performance and strengthen the balance sheet of the existing company….” Abitibi shareholders, he continued, also stand to lose their voice in corporate governance. “The combined company will adopt a staggered board entrenching its members and the management of the company, irrespective of the combined company’s performance. This will leave shareholders in the proposed entity essentially voiceless.”
Furthermore, said Wadhwaney, “It is patently unreasonable for shareholders to be asked to approve a merger while Canadian and U.S. regulatory approvals are still pending. Until such approvals are secured, it is impossible to know in what way they may be conditioned upon the disposition of assets by one or both of the merger companies to address antitrust concerns. Shareholders can not make an informed decision about the merger while key regultory approvals are still pending.”