COLUMBIA -- Shareholders approved a deal Thursday to combine Canadian forest products company Abitibi-Consolidated LLC with South Carolina newsprint maker Bowater Inc., company officials said.
Seventy percent of Bowater's shares were voted in favor of the all-stock deal at the annual meeting in Atlanta, the company said. Abitibi said 80 percent of its shares were voted in favor of the deal at a special meeting in Montreal.
The new company, to be called AbitibiBowater Inc., would be the third-largest forest products company in North America. It would be based in Abitibi's hometown of Montreal.
"This is an historic day for Bowater, and I am very pleased that our stockholders have expressed their strong support for our proposed combination with Abitibi-Consolidated," said Bowater president and chief executive David J. Paterson.
John Weaver, president and chief executive of Abitibi-Consolidated, said he was pleased "that our shareholders share the same perspective on the benefit of the proposed combination with Bowater."
"We believe AbitibiBowater will be a global leader with a brighter future than either company would have on its own," he said.
Although both companies have seen shrinking demand and prices in the paper and newsprint markets, they expect the combined company to save $250 million in costs. It is expected to have annual revenues of about $8 billion.
Canadian regulators have already approved the deal, which still needs U.S. government approval.
The deal is expected to be completed this quarter.
Abitibi's largest shareholder, Third Avenue Management with more than 12 percent of the company's stock, had announced it would vote against the deal.
The shareholder said it was not a good value for Abitibi-Consolidated investors, who will end up owning about 48 percent of the new company following the stock swap.
Citigroup analyst Chip Dillon said he expected to see Bowater earnings to improve in the third quarter with the combined company seeing some of the cost savings as early as the first quarter of next year.
"We see Bowater's losses narrowing in the third quarter despite an expected wider newsprint loss," Dillon wrote in an analysis released Thursday. Dillon said he expects higher prices in coming quarters in the U.S. newsprint market as well as the pulp and groundwood coated paper market.
Both companies' shares fell more than 6 percent in trading Thursday. Bowater fell $1.51 to $20.86 a share and Abitibi-Consolidated fell 17 cents to $2.55 a share.