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Stone-Consolidated to Buy Rainy River: Merged Company Would Be North America's Second-Largest Newsprint Producer

Magazine article Editor & Publisher

Stone-Consolidated to Buy Rainy River: Merged Company Would Be North America's Second-Largest Newsprint Producer

Article excerpt

RAINY RIVER FOREST Products Inc. directors approved a merger with Stone-Consolidated Corp. at a meeting Sept. 17.

The transaction, valued at approximately $325 million, would create a second giant in the North American newsprint market.

Merger plans were announced month earlier by Boise Cascade Corp., which owns 60% of Toronto-based Rainy River and holds about 49% of its voting shares since spinning off the newsprint and groundwood specialties papermaker more than a year ago.

After investigation of any interest by other potential buyers and due diligence examinations by both firms, the board drew up and signed merger documents Sept. 18. The matter now goes before shareholders in Montreal-based Stone-Consolidated and Rainy River (who meet Oct. 31). Pending approval by debt holders and Quebec Superior Court, the merger is expected to be completed by year's end.

Robert Merrill, Rainy River senior vice president of sales and marketing, said the merged company will operate under the Stone-Consolidated name. Under the plan, said Merrill, Chicago-based Stone Container Corp.'s 75% stake in Stone-Consolidated will be reduced to about 48%, and Boise Cascade will hold up to 7% of common shares.

Each Stone-Consolidated share is to convert into a common share in the new company. Reuters reported that each Rainy River share can convert either to 1.04 common share or an 8% redeemable preferred share in the new Stone-Consolidated. It said 80% of the preferred shares will be immediately redeemable at C$21.50 (up to C$500 million worth, with pro-rated allocation of any amount exceeding that limit), with the balance redeemed for cash over time.

Most of Boise Cascade's Rainy River shares are to convert to the new preferred shares, bringing at least $216 million in cash that it said "will be used for debt reduction, capital investment in the company's three business segments and other purposes aimed at enhancing sharehold value."

Remaining Boise Cascade shares would convert to common shares corresponding to its 7% holding in the merged company.

In newsprint production capacity, the merged company will place a close second to Canada's Abitibi-Price Inc. Merrill said it would produce and have access to a total of approximately 2 million metric tons -- including marketing rights to newsprint from Boise Cascade's DeRidder, La., mill and Stone's Snowflake, Ariz., mill.

Each party, he added, brings two groundwood specialty papers mills to the new company, making it North America's largest producer of the uncoated papers that range in quality from those used in directories to super-calendared sheet that competes with lighter coated stock in catalogs and magazines. …

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