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Swift Consolidation Sweeps Paper Industry

April 2000
NEW YORK—It took two years for consolidation to transform the commercial printing sector, it has taken two months of consolidation to transform the printing equipment supplier sector, and in a remarkably swift series of moves, it has taken scarcely two weeks for consolidation to transform the paper market.

In mid-February, the low share prices of paper companies, as well as the usual quest to expand markets and raw material sources, drove a series of mergers and acquisitions in the paper and forest products industry—moves that will have a broad impact on commercial printers, for whom paper products are a primary cost center.

Among the recent moves:

  • Scandinavian Stora Enso has plans to buy Wisconsin Rapids, WI-based Consolidated Papers;

  • Europe’s second-biggest paper and board maker, UPM-Kymmene, plans to buy Stamford, CT-based Champion International for more than $6 billion;

  • International Paper (IP) said it was buying Shorewood Packaging;

  • Canada-based Abitibi-Consolidated said it would buy Canadian Donohue (partially owned by Quebecor); and

  • Quebec’s St. Laurent Paperboard agreed to a takeover bid by Chicago-based Smurfit-Stone Container for $1.4 billion in cash, stock and assumed debt. Stora Enso has already said it would buy Norway’s biggest paper wholesaler, Carl Emil A/S.


Stora Enso will buy Consolidated Papers for approximately $4.84 billion in cash, stock and debt, a move that officials say will make it the world’s top paper and board producer, with paper capacity of approximately 15 million metric tons.

Finnish company UPM-Kymmene said that when it completes its purchase of Champion, it will set up a new group, which will take the Champion International name and give the group paper production capacity of 12.1 million tons a year.

International Paper’s proposed purchase of Shorewood comes on the heels of Shorewood’s successful rejection of a hostile takeover bid by Chesapeake Corp. International Paper will make a cash tender offer of $21 per share; Shorewood shares jumped to just over $20 when the announcement was made. IP will also assume approximately $275 million of Shorewood’s outstanding debt producer.

Abitibi-Consolidated said it will offer C$42 in cash and stock for each Donohue share. Abitibi is the world’s largest newsprint maker, while Donohue is North America’s third-largest producer.

Abitibi President and CEO John Weaver called his deal “a rare and fortuitous opportunity brought on by Quebecor’s decision to divest its interest in Donohue and we were ready to act.”
 

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