Antitrust Okays Abitibi-Bowater Merger -- But Requires Sale Of Arizona Mill

By: Mark Fitzgerald The Department of Justice (DOJ) Tuesday approved the merger of Abitibi Consolidated Inc. and Bowater Inc., but said it will require the newsprint giants to divest an Arizona mill.

DOJ originally opposed the $1.6 billion merger, saying it would have substantially decreased the competition for newsprint in North America.

The Newspaper Association of America (NAA) immediately blasted the approval, saying the proposed sell-off the Arizona newsprint mill was an "extremely limited divestiture."

"Approving the combination of the first- and second-ranked newsprint manufacturers is not a healthy development, particularly in light of the history of marketplace activities in the newsprint sector," NAA President and CEO John F. Sturm. "In addition, we believe that divestiture of a mill in Arizona is not an effective remedy to preserve competition in the newsprint industry, particularly in the southeastern part of the United States where the combined entity will have a stranglehold on newsprint production."

In a two-step process, DOJ's Antitrust Division filed a civil antitrust lawsuit Tuesday in U.S. District Court in Washington, D.C. At the same time, it filed a proposed consent decree that it said "will resolve the lawsuit and the department's competitive concerns."

Under the proposed consent decree -- which must be approved by the court -- Abitibi and Bowater agree to divest Abitibi's newsprint mill in Snowflake, Arizona. DOJ described the mill in a statement as "one of the largest and most profitable newsprint mills in North America."

In addition, it said, the merged "will be required to notify the department before acquiring an additional interest in any mill or machine that is currently jointly-owned by either Abitibi or Bowater with any third party, if the value of the acquisition exceeds $2 million."

"Without a divestiture, the combined company could have strategically closed capacity and raised prices," Deborah A. Garza, the Antitrust Division's deputy assistant attorney general said in a statement. "This divestiture will ensure that newsprint consumers continue to enjoy the benefits of competition."

Montreal, Quebec-based Abitibi owns 12 paper mills worldwide that produce newsprint, including 11 in the United States and Canada. In 2006, it reported total sales of about $4.8 billion, including about $1.7 billion in North American newsprint sales.

Greenville, S.C.-based Bowater owns nine newsprint mills, eight of them in the United States and Canada. Last year, Bowater reported total sales of approximately $3.5 billion, including about $1.1 billion in North American newsprint sales.