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Bowater hauls in Avenor
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March 9, 1998: 4:16 p.m. ET
Wins with a higher offer after forest products company rejects Abitibi bid
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NEW YORK (CNNfn) - Canadian forest products company Avenor Inc. signed an agreement to be acquired by Bowater Inc. for $3.5 billion (US$2.47 billion) after rejecting a lower bid by Abitibi-Consolidated Inc.
Greenville, S.C.-based Bowater, the largest producer of newsprint in the United States, will buy up all of Avenor's shares for $35 (US$24.67) each and assume its debt. Avenor shareholders will have the option of receiving cash, shares of Bowater, or Canadian-listed shares of the new Bowater Canadian subsidiary.
In late February, Avenor found itself the target of an unsolicited $2.97 billion (US$2.1 billion) bid from Abitibi (ABY), a rival Canadian newsprint and paper products company. However, Avenor slapped back the offer, calling it "grossly inadequate."
Avenor's chief executive officer, Arthur Sawchuk, on Monday declared the Bowater offer to be "clearly superior to a number of other alternatives available to Avenor," and recommended that shareholders vote in favor of the transaction.
Montreal-based Avenor said the agreement includes provisions that Avenor will not solicit or encourage any other offers.
Abitibi's chief executive officer, Jim Doughan, said Monday his company would not get into a bidding war for Avenor.
"We are disappointed because we really understood the significant value of combining Abitibi-Consolidated and Avenor,'' he said.
"We are surprised at the price they [Bowater] have offered since we believe we had the most natural synergies with Avenor that could be realized quickly. At our price, Avenor would have been a very good deal for our shareholders, but there is no way that we will bet the future of our company on any one acquisition.''
Avenor said shareholder meeting materials will be mailed out by the end of May and, if shareholder and regulatory approvals are received, the transaction will be completed by the end of June.
Bowater (BOW) has five paper mills and 3.5 million acres of timberlands in the United States and Canada. Into those operations, Bowater will fold Avenor's eight newsprint mills.
Bowater looked for the combination to have an immediately positive effect on its company's earnings, including cost savings of $35 million identified by an operational improvement plan previously announced by Avenor (ANR) and an additional $75 million in savings through other means.
Additionally, Bowater said that after the transaction is completed, it will sell Avenor's paper and pulp mill in Dryden, Ontario, and use the proceeds to pay off some debt. 
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