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The shareholders of Bowater Inc. on Wednesday approved the company’s $2.5 billion offer to acquire a Canadian newsprint producer, Avenor Inc. The deal would make Bowater the second-largest producer of newsprint in the world, but also raises the chances that the Greenville, S.C.-based papermaker will unload its holdings in Maine.
The company confirmed earlier this month that, while it is expanding into Canada as well as Asia, it is also considering unsolicited offers for its Great Northern Paper division, which includes paper mills in Millinocket and East Millinocket, as well as 2.1 million acres of forestlands in the state and a sawmill in Ashland.
Officials with the company would only say they will consider the offers for the Maine operations after they complete the Avenor deal.
“The special meeting of shareholders was held this morning and it was overwhelmingly in favor of the acquisition of Avenor,” said Deborah Humphrey, a Bowater spokeswoman on Wednesday.
The offer for the Montreal-based Avenor was made public in March and topped an offer from a competing Canadian forest and paper products company, Abitibi-Consolidated. The deal, which involves six paper mills and two sawmills, is expected to be finalized by the end of this week.
The shareholders of Avenor also held a special meeting on Wednesday and, according to company officials in Montreal, approved the offer with nearly 100 percent of the votes. Bowater’s shareholders also approved the deal with a similar majority.
Word of the overwhelming approval by shareholders came as no surprise to analysts who have been watching the deal come together. The analysts have been crowing over a new management team at the company headed up by Arnold M. Nemirow, who was named president and chief operating officer three years ago and who is credited with helping to turn the company around.
Since Nemirow came on board, Bowater has cut costs and sold parts of the business that took away from the focus on products such as newsprint. The charge into Asia and now Canada is adding considerable debt to the company’s balance sheets after years of financial parsimony but, in light of what is seen as the need for consolidation in the industry, many analysts are giving their nod of approval.
However, it also raises the specter of a sale in Maine.
“I think that there is a connection,” said Andrea Lawrence, BT Alex Brown equity analyst. “This acquisition does result in Bowater having more debt on their balance sheets. A sale of their Maine operations would help them pay down that debt.”
Lawrence also pointed out there is potential overlap between Avenor’s operations and the mills and forestlands in Maine.
Industry watchers have previously put the possible sale price of the Great Northern Paper division at around $750 million. Such a deal would also save the parent company $220 million in upgrades that it has committed to at the East Millinocket mill.
Bowater officials have not named any of the parties that have expressed an interest in the Maine holdings.
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