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Paper giants plan to merge operations

COLUMBIA, S.C. -- Canada's Abitibi-Consolidated Inc. and Bowater Inc. of South Carolina said they would combine in a stock deal that their chief executives said should create a more powerful global competitor despite a declining US newsprint market.

The combined company would be known as AbitibiBowater Inc. and have annual revenue of about $7.9 billion and a market capitalization of about $2.4 billion.

The combined company should be able to cut annual costs by about $250 million as a result of efficiency in areas such as production, selling, general and administrative costs, distribution, and procurement, the companies said.

"In order to strengthen both of our companies, this deal brings us both together and moves us to the next plateau" with a better mix of products and cutting costs, Abitibi chief John W. Weaver said.

Bowater CEO David J. Paterson said he and Weaver have been working on the deal for about three months. He said he and Weaver got acquainted shortly after he took his job in May. Both companies were looking at "options for growth," he said.

"We did our homework. We did our due diligence," Paterson said. "We felt this was the right one to pursue."

Weaver would be executive chairman of AbitibiBowater and Paterson would be president and CEO.

AbitibiBowater's product lines will include newsprint, uncoated and coated mechanical papers, market pulp, and wood products. It will also be one of the world's leading consumers of recycled newspapers and magazines.

The combined company will own or operate 32 pulp and paper facilities and 35 wood product facilities located mainly in eastern Canada and the southeastern United States. The firms said it would be the third-largest paper and forest products company in North America.