Merger in troubled newsprint industry

NEW YORK (CNNMoney.com) -- Two major newsprint suppliers announced a merger of equals early Monday as they try to respond to the troubles in the newspaper industry.

Abitibi-Consolidated (Charts), which has a market value of $1.16 billion, and Bowater (Charts), with a market value of $1.24 billion, will combine in an all-stock transaction that will created a company to be known as AbitibiBowater.

The companies' release said 48 percent of the combined company will be owned by former Abitibi-Consolidated shareholders and 52 percent by former Bowater shareholders.

The new company's headquarters will be at Abitibi's current home in Montreal, while it said its U.S. regional office will be at Bowater's Greenville, S.C. headquarters.

Abitibi CEO John Weaver will be executive chairman of AbitibiBowater while Bowater Chairman and CEO David Paterson will be president and CEO of the new company.

The companies said the combined entity will have pro forma annual revenue of approximately $7.9 billion, which it said will make it the No. 3 publicly traded paper and forest products company in North America and No. 8 in the world.

Newspapers and magazines have been facing financial trouble as readers and advertising dollars have shifted to Internet news sources. Tribune Co. (Charts), one of the nation's largest newspaper publishers, has put itself on the market under pressure from its major shareholder, but has been unable to get a premium bid for the company.

The nation's largest magazine publisher, Time Inc., which like CNNMoney.com is a unit of Time Warner (Charts), announced earlier this month it was cutting 300 jobs, following a path of several newspaper publishers, including Tribune Co.

In addition some newspapers, including the Wall Street Journal, a unit of Dow Jones (Charts), have cut the size of the newspaper, reducing newsprint expenses.

Abitibi-Consolidated and Bowater have been hurt by the downturn in the newspaper and magazine industries. Shares of Abitibi have plunged 46 percent in the last nine months, and Bowater shares have fallen 27 percent over the same period.

"This is a logical strategic step to address the realities of today's marketplace," said a statement from Paterson.

A PR magnate struggles to revive a newspaper