BOWATER INC, SC 13E4, 1995-10-16

BOWATER INC
SC 13E4, 1995-10-16
PAPER MILLS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)

BOWATER INCORPORATED
(Name of Issuer)

BOWATER INCORPORATED
(Name of Person(s) Filing Statement)

Depositary Shares, Each Representing a One-Fourth Interest in a Share of
8.40% Series C Cumulative Preferred Stock, Par Value $1.00 Per Share,
$100 Liquidation Preference Per Share
(Title of Class of Securities)

102183-605
(CUSIP Number of Class of Securities)

Wendy C. Shiba
Secretary and Assistant General Counsel
Bowater Incorporated
55 East Camperdown Way
P. O. Box 1028
Greenville, SC 29602
(803) 271-9337
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)

Copy to:
Eric B. Amstutz, Esq.
Jo Watson Hackl, Esq.
Wyche, Burgess, Freeman & Parham, P.A.
44 East Camperdown Way
P. O. Box 728
Greenville, SC 29602
(803) 242-8200

October 16, 1995
(Date Tender Offer First Published, Sent
or Given to Security Holders)

CALCULATION OF FILING FEE

TRANSACTION VALUATION* AMOUNT OF FILING FEE**
$94,775,000.00 $18,955.00

* Assumes purchase of 3,400,000 Depositary Shares at $27.875 per Depositary
Share.

** Calculated based on the transaction valuation multiplied by one-fiftieth of
one percent.

[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.

Amount Previously Paid: N/A Filing Party: N/A
Date Filed: N/A
Form or Registration No.: N/A

<PAGE>

ITEM 1. SECURITY AND ISSUER.

(a) The name of the issuer is Bowater Incorporated, a Delaware corporation
(the "Company"), which has its principal executive offices at 55
East Camperdown Way, Greenville, SC 29602 (telephone (803) 271-7733).

(b) The information set forth in the front cover page, "Introduction",
"Section 1. Purpose of the Offer; Certain Effects of the Offer; Plans of the
Company after the Offer", "Section 4. Expiration Date; Extension of the
Offer", "Section 9. Price Range of the Depositary Shares; Dividends", and
"Section 12. Transactions and Arrangements Concerning the Depositary Shares"
of the Offer to Purchase, a copy of which is attached hereto as Exhibit (a)(1),
(the "Offer to Purchase") is incorporated herein by reference.

(c) The information set forth in the "Introduction" and "Section 9. Price
Range of the Depositary Shares; Dividends" of the Offer to Purchase is
incorporated herein by reference.

(d) This statement is being filed by the issuer.

ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a) The information set forth in "Section 11. Source and Amount of Funds" of
the Offer to Purchase is incorporated herein by reference.

(b) Not applicable.

ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.

(a)-(j) The information set forth in "Section 1. Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company after the Offer" of the
Offer to Purchase is incorporated herein by reference.

ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.

The information set forth in "Section 12. Transactions and Arrangements
Concerning the Depositary Shares" of the Offer to Purchase is incorporated
herein by reference.

ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.

The information set forth in "Section 12. Transactions and Arrangements
Concerning the Depositary Shares" of the Offer to Purchase is incorporated
herein by reference.

ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

The information set forth in the front cover page and "Section 14. Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.

ITEM 7. FINANCIAL INFORMATION.

(a)-(b) The financial information set forth in "Section 10. Certain
Information Concerning the Company" of the Offer to Purchase is incorporated
herein by reference. The audited financial statements of the Company set
forth on pages 16-35 of Exhibit 13.1 to the Company's Report on Form 10-K,
filed with the Commission on

<PAGE>

March 29, 1995, are incorporated herein by reference. The unaudited financial
statements of the Company set forth in the Company's Report on Form 10-Q for
the quarterly period ended June 30, 1995 are incorporated herein by reference.

ITEM 8. ADDITIONAL INFORMATION.

(a) None.

(b) The information set forth in "Section 3. Certain Legal Matters;
Regulatory and Foreign Approvals; No Appraisal Rights" of the Offer to
Purchase is incorporated herein by reference.

(c) The information set forth in "Section 1. Purpose of the Offer; Certain
Effects of the Offer; Plans of the Company after the Offer" of the Offer to
Purchase is incorporated herein by reference.

(d) None.

(e) Reference is hereby made to the Offer to Purchase and the related Letter
of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and
(a)(2), respectively, and incorporated in their entirety herein by reference.

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.

(a)(1) Form of Offer to Purchase dated October 16, 1995.

(a)(2) Form of Letter of Transmittal.

(a)(3) Form of Notice of Guaranteed Delivery.

(a)(4) Form of letter to brokers, dealers, commercial banks, trust companies
and other nominees dated October 16, 1995.

(a)(5) Form of letter to clients for use by brokers, dealers, commercial
banks, trust companies and other nominees dated October 16, 1995.

(a)(6) Form of press release dated October 16, 1995.

(a)(7) Form of summary advertisement dated October 17, 1995.

(a)(8) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.

(b) Not applicable.

(d) Not applicable.

(e) Not applicable.

<PAGE>

(f) Retail Information Memorandum of Merrill Lynch & Co.

<PAGE>

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.

BOWATER INCORPORATED

By: /s/ David G. Maffucci
Name: David G. Maffucci
Title: Vice President - Treasurer

Dated: October 16, 1995

<PAGE>

EXHIBIT INDEX

SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE

(a)(1) Form of Offer to Purchase dated October 16, 1995 7
(a)(2) Form of Letter of Transmittal 42
(a)(3) Form of Notice of Guaranteed Delivery 54
(a)(4) Form of letter to brokers, dealers, commercial banks,
trust companies and other nominees dated October 16, 1995 56
(a)(5) Form of letter to clients for use by brokers,
dealers, commercial banks, trust companies and
other nominees dated October 16, 1995 61
(a)(6) Form of press release dated October 16, 1995 63
(a)(7) Form of summary advertisement dated October 17, 1995 64
(a)(8) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 68
(f) Retail Information Memorandum of Merrill Lynch & Co. 71

(BOWATER LOGO APPEARS HERE)

The Depositary Shares are listed and traded on the New York Stock Exchange
(the "NYSE"). On October 13, 1995, the last trading day before the Company
announced the Offer, the closing sales price of the Depositary Shares as
reported on the NYSE Composite Tape was $26.50 per Depositary Share.

HOLDERS OF DEPOSITARY SHARES ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE DEPOSITARY SHARES.

The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee of $0.375 per Depositary Share, or for any transaction equal to
or exceeding 20,000 Depositary Shares, $0.25 per Depositary Share, for any
Depositary Shares tendered, accepted for payment and paid for pursuant to the
Offer, subject to certain conditions. See Section 14.

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION AS TO WHETHER ANY HOLDER OF DEPOSITARY SHARES SHOULD TENDER ANY
OR ALL OF SUCH HOLDER'S DEPOSITARY SHARES PURSUANT TO THE OFFER. HOLDERS OF
DEPOSITARY SHARES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER DEPOSITARY
SHARES AND, IF SO, THE NUMBER OF DEPOSITARY SHARES TO TENDER.

The Dealer Manager for the Offer Is:
MERRILL LYNCH & CO.
October 16, 1995

<PAGE>
IMPORTANT
Any holder of Depositary Shares desiring to tender all or any portion of
such holder's Depositary Shares should either (i) complete the Letter of
Transmittal in accordance with the instructions in the Letter of Transmittal,
mail or deliver it and any other required documents to The Bank of New York (the
"Depositary"), and either mail or deliver the depositary receipts evidencing
such Depositary Shares to the Depositary along with the Letter of Transmittal or
follow the procedure for book-entry transfer set forth in Section 5, or (ii)
request such holder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such holder. Holders of Depositary Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such person if they desire to tender their Depositary
Shares. Holders who wish to tender Depositary Shares and whose depositary
receipts for such Depositary Shares are not immediately available should tender
such Depositary Shares by following the procedures for guaranteed delivery set
forth in Section 5.

Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to Morrow & Co., Inc. (the "Information Agent") or to
Merrill Lynch & Co. (the "Dealer Manager") at the addresses and telephone
numbers set forth on the back cover of this Offer to Purchase.

NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER HOLDERS OF DEPOSITARY SHARES SHOULD TENDER OR REFRAIN FROM
TENDERING DEPOSITARY SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE
OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.

<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SUMMARY.................................................................. 1
INTRODUCTION............................................................. 2
SPECIAL FACTORS.......................................................... 2
Section 1. Purpose of the Offer; Certain Effects of the Offer; Plans
of the Company after the Offer............................. 2
Section 2. Certain Federal Income Tax Consequences.................... 5
Section 3. Certain Legal Matters; Regulatory and Foreign Approvals;
No Appraisal Rights........................................ 7
THE OFFER................................................................ 8
Section 4. Expiration Date; Extension of the Offer.................... 8
Section 5. Procedure for Tendering Depositary Shares.................. 8
Section 6. Withdrawal Rights.......................................... 9
Section 7. Acceptance for Payment of Depositary Shares and Payment
of Purchase Price.......................................... 10
Section 8. Certain Conditions of the Offer............................ 11
Section 9. Price Range of the Depositary Shares; Dividends............ 12
Section 10. Certain Information Concerning the Company................. 13
Section 11. Source and Amount of Funds................................. 20
Section 12. Transactions and Arrangements Concerning the Depositary
Shares..................................................... 20
Section 13. Extension of the Tender Period; Termination;
Amendments................................................. 20
Section 14. Fees and Expenses.......................................... 21
Section 15. Miscellaneous.............................................. 22
SCHEDULE I............................................................... I-1
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.......................... I-1
</TABLE>

<PAGE>
SUMMARY
This summary is provided solely for the convenience of holders of
Depositary Shares and is qualified in its entirety by reference to the full text
and more specific details contained in this Offer to Purchase and the related
Letter of Transmittal and any amendments or supplements hereto and thereto.
<TABLE>
<S> <C>
The Company Bowater Incorporated.
The Depositary Shares Depositary Shares, each representing a one-fourth interest in a share of 8.40%
Series C Cumulative Preferred Stock, $1.00 par value, $100 liquidation
preference, of the Company.
Number of Depositary Shares Sought 3,400,000 (all of the Depositary Shares outstanding).
Purchase Price $27.875 per Depositary Share, net to the seller in cash. See Section 9.
Expiration Date November 15, 1995, at 12:00 midnight, Eastern Time, unless the Company shall
have extended the period of time during which the Offer is open, in which
event the Expiration Date shall be the latest time and date at which the
Offer, as so extended by the Company, shall expire. See Section 4.
How to Tender Depositary Shares See Section 5. For further information, call the Information Agent or the
Dealer Manager or consult your broker for assistance.
Withdrawal Rights Tendered Depositary Shares may be withdrawn at any time on or prior to the
Expiration Date of the Offer and, if not yet accepted for payment by the
Company, may also be withdrawn after 12:00 midnight, Eastern Time, on December
11, 1995. See Section 6.
Purpose of Offer The Company is making the Offer in order to reduce the high fixed cost
obligations of the preferred stock dividends. The Company believes that, given
its current financial condition (including its substantial current cash and
cash equivalents position) and the current market price of the Depositary
Shares, the purchase of the Depositary Shares pursuant to the Offer is
economically attractive to the Company. The Offer gives holders of Depositary
Shares the opportunity to sell their Depositary Shares at a premium over the
market price prevailing prior to the announcement of the Offer and without the
usual transaction costs associated with a market sale. See Section 1.
Market Price of Depositary Shares On October 13, 1995, the last trading day prior to the announcement of the
Offer, the closing price per Depositary Share on the NYSE Composite Tape was
$26.50. Holders are urged to obtain a current market quotation for the
Depositary Shares. See Section 9.
Dividends Holders of record as of September 11, 1995, of Depositary Shares tendered and
purchased by the Company will be entitled to the regular quarterly cash
dividend of $0.525 per Depositary Share to be paid by the Company on October
16, 1995, for the third quarter of 1995, but will not receive any additional
accrued dividends with respect to the Depositary Shares tendered and purchased
by the Company. See Section 9.
Payment Date Promptly after the Expiration Date of the Offer.
Dealer Manager Merrill Lynch & Co.
Depositary The Bank of New York.
Information Agent Morrow & Co., Inc.
Further Information Additional copies of this Offer to Purchase and the Letter of Transmittal may
be obtained by contacting Morrow & Co., Inc., (800) 662-5200 or (212) 754-8000
(call collect). Questions about the Offer should be directed to Merrill Lynch
& Co., (212) 236-4565 (call collect).
</TABLE>

<PAGE>
To the Holders of the Depositary Shares:
INTRODUCTION
Bowater Incorporated, a Delaware corporation (the "Company"), is offering
to purchase any and all of the outstanding Depositary Shares (the "Depositary
Shares"), each representing a one-fourth interest in a share of its 8.40% Series
C Cumulative Preferred Stock, par value $1.00 per share, liquidation preference
$100 per share (the "Series C Cumulative Preferred Stock"), at $27.875 per
Depositary Share (the "Purchase Price"), net to the seller in cash, upon the
terms and subject to the conditions set forth in this Offer to Purchase (the
"Offer to Purchase") and in the related Letter of Transmittal (which, together
with this Offer to Purchase, constitutes the "Offer").
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION AS TO WHETHER ANY HOLDER OF DEPOSITARY SHARES SHOULD TENDER ANY
OR ALL OF SUCH HOLDER'S DEPOSITARY SHARES PURSUANT TO THE OFFER. HOLDERS OF
DEPOSITARY SHARES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER DEPOSITARY
SHARES AND, IF SO, THE NUMBER OF DEPOSITARY SHARES TO TENDER.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF DEPOSITARY SHARES
BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 8.
The Depositary Shares are listed and traded on the New York Stock Exchange
(the "NYSE"). On October 13, 1995, the last trading day before the Company
announced the Offer, the closing sales price of the Depositary Shares as
reported on the NYSE Composite Tape was $26.50 per Depositary Share. See Section
9. HOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE DEPOSITARY
SHARES.
The Offer does not constitute a notice of redemption of the Series C
Cumulative Preferred Stock underlying the Depositary Shares pursuant to the
Company's Restated Certificate of Incorporation nor does the Company intend to
effect such a redemption by making the Offer. Holders are not under any
obligation to accept the Offer or to remit the Depositary Shares to the Company
pursuant to the Offer. In accordance with the Restated Certificate of
Incorporation and the Deposit Agreement that established the rights of the
holders of Depositary Shares, the shares of Series C Cumulative Preferred Stock
(and the corresponding Depositary Shares) are not redeemable prior to February
8, 1999. On and after February 8, 1999, the Series C Cumulative Preferred Stock
is redeemable at the option of the Company, in whole or in part, at $100 per
share (equivalent to $25 per Depositary Share) plus accrued and unpaid dividends
(whether or not declared) to the redemption date. The Series C Cumulative
Preferred Stock has no stated maturity and is not subject to any sinking fund or
mandatory redemption and is not convertible into any other securities of the
Company.
Tendering holders of Depositary Shares will not be obligated to pay
brokerage commissions, solicitation fees or, subject to the Instructions to the
Letter of Transmittal, stock transfer taxes on the purchase of Depositary Shares
by the Company. The Company will pay all charges and expenses of the Depositary,
Information Agent, Dealer Manager and any Soliciting Dealer incurred in
connection with the Offer.
SPECIAL FACTORS
SECTION 1. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE
COMPANY AFTER THE OFFER
The Company is making the Offer in order to reduce the high fixed cost
obligations of the preferred stock dividends. The Series C Cumulative Preferred
Stock has the highest dividend costs of any of the Company's preferred stock.
The Offer will enable the Company to reduce its dividend requirements and annual
administrative expenses. The Company believes that, given the current market
price of the Depositary Shares, the Company's current financial condition
(including its substantial current cash and cash equivalents position), and the
relative benefits and disadvantages of repurchasing the Company's other series
of preferred stock or public debt, the purchase of the Depositary Shares
pursuant to the Offer is economically attractive to the Company. The Company's
cash, cash equivalents and marketable securities position was $206,687,000 at
September 30, 1995. If all 3,400,000 of the outstanding Depositary Shares are
tendered, cash will be reduced by approximately $96,665,000 as a result of the
consummation of the Offer and the Company's annual divided requirements will be
reduced by $7,140,000. The Board of Directors of the Company (the "Board"),
acting through its Finance Committee (which committee, comprised of three
directors who are not employed by the Company, approved the Offer by a unanimous
vote), has authorized the Offer. Neither the Board nor that portion of the Board
consisting only of non-employee members of the Board has taken, or is required
to take, any action with respect to the Offer.
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<PAGE>
No vote of any holder of any of the Company's securities is required in
connection with the Offer.
The Company believes the Offer is fair to holders of Depositary Shares. In
making this determination, the Company considered the following factors: (a) the
premium represented by the difference between the consideration offered to
holders of the Depositary Shares and recent and historical trading prices of the
Depositary Shares and that the Offer gives holders of Depositary Shares the
opportunity to sell their Depositary Shares at a 5.19% premium over the closing
sales price of $26.50 per Depositary Share on October 13, 1995 (the last trading
day prior to the announcement of the Offer); and (b) that the Offer will provide
holders who are considering a sale of all or a portion of the Depositary Shares
the opportunity to sell those Depositary Shares for cash without the usual
transaction costs associated with open-market sales. The Company did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
these factors.
Neither the Company nor the Board has received any report, opinion or
appraisal that is materially related to the Offer, including, but not limited
to, any report, opinion or appraisal relating to the consideration or the
fairness of the consideration to be offered to the holders of the Depositary
Shares or the fairness of the transaction to the Company or to any security
holder of the Company. No director of the Company has retained an unaffiliated
representative to act solely on behalf of unaffiliated shareholders for the
purposes of negotiating the terms of the transaction or preparing a report
concerning the fairness of the transaction.
On October 11, 1995, Standard & Poor's Corporation announced, in
conjunction with its ratings upgrade on the Company's senior debt from BBB- to
BBB with a stable outlook, a ratings upgrade on all classes of the Company's
preferred stock from BB+ to BBB-. Moody's Investors Service, Inc. has made no
change in its ratings on the Company's senior debt or preferred stock. These
remain at Baa1 and baa2, respectively.
Following the consummation of the Offer, the business and operations of the
Company will be continued by the Company substantially as they are currently
being conducted. In the first quarter of 1995, the Company repurchased
approximately $182 million of its 8.5% notes due 2001, of which $200 million in
principal amount were outstanding prior to the repurchase. On July 31, 1995, the
Company also completed a repurchase of approximately $117 million of its
outstanding 8.25% Notes due 1999, of which $125 million in principal amount were
outstanding prior to the repurchase. The Company funded these debt repurchases
from its available cash and marketable securities. The amount and timing of any
future debt reductions are subject to, among other factors, the cost of such
reductions, the strength of the Company's cash flow and alternative uses of
cash.
The Company has previously disclosed its intention to sell Bowater
Communication Papers Inc. ("BCPI"), a wholly-owned subsidiary of the Company.
The Company is in the process of evaluating offers that it has solicited, but
has not reached agreement with any party as to the terms or form of any
transaction. After evaluating the offers received, however, the Company expects
to incur an after-tax loss on the sale of approximately $30 million and has
recorded this amount as a charge against its earnings for the third quarter of
1995. In addition, the Company is currently in the process of identifying for
sale and marketing selected tracts of timberlands but is not in a position to
determine the possible financial outcome of its marketing efforts.
Anthony P. Gammie, Chairman of the Board of the Company, will retire from
his position on March 31, 1996. The Board expects to appoint a successor
Chairman of the Board in 1996. The Board also expects to elect a new director to
fill the vacancy on the Board of Directors. In addition, on August 17, 1995,
Robert C. Lancaster resigned as Senior Vice President and Chief Financial
Officer. The Company expects to appoint his successor in the near future.
The Company has undertaken a study that may result in its modifying the
severance agreements of approximately thirty key employees with respect to
payments to the employee upon a change in control of the Company. The
modifications have not been finalized and no decision has been reached on their
adoption.
At its July 1995 meeting, the Board of Directors adopted two amendments to
the By-Laws of the Company. The first amendment provides that only business that
is brought before an annual meeting of stockholders in the manner specified in
the By-Laws may be conducted at the meeting. The second amendment specifies the
requirements for notification by shareholders to the Company of nominations for
the election of directors.
Except as disclosed in this section and elsewhere in this Offer to
Purchase, the Company has no other present plans or proposals that relate to or
would result in (i) the acquisition by any person of additional securities of
the Company, or the disposition of securities of the Company, (ii) an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation or sale or transfer of a material amount of assets, involving the
Company or any of its subsidiaries, (iii) any change in the present Board of
Directors of the Company or management of the Company, including, but not
limited to, a plan or
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<PAGE>
proposal to change the number or term of the directors, to fill any existing
vacancy on the Board of Directors or to change any material term of the
employment contract of any executive officer, (iv) any material change in the
present dividend rate or policy or indebtedness or capitalization of the
Company, (v) any other material change in the Company's corporate structure or
business, (vi) a class of the Company's equity securities being delisted from a
national securities exchange, ceasing to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association or
becoming eligible for termination of registration under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or (vii) any changes in the
Company's charter, By-Laws or instruments corresponding thereto or any other
actions which may impede the acquisition of control of the Company by any
person.
Following the expiration of the Offer, the Company may, in its sole
discretion, determine to purchase any remaining Depositary Shares through
privately negotiated transactions, open market purchases, another tender offer
or otherwise, on such terms and at such prices as the Company may determine from
time to time. The terms of subsequent purchases or offers could differ from
those of the Offer, except that the Company will not make purchases of
Depositary Shares, if any, until the expiration of ten business days after the
termination of the Offer. Any possible future purchases of Depositary Shares by
the Company will depend on many factors, including the market price of the
Depositary Shares, the Company's business and financial position, alternative
investment opportunities available to the Company, the results of the Offer and
general economic and market conditions.
The purchase of Depositary Shares pursuant to the Offer will reduce the
number of holders of Depositary Shares and the number of Depositary Shares that
might otherwise trade publicly, and, depending upon the number of Depositary
Shares so purchased, could adversely affect the liquidity and market value of
the remaining Depositary Shares held by the public.
Depending upon the number of Depositary Shares purchased pursuant to the
Offer, the Depositary Shares may no longer meet the requirements of the NYSE for
continued listing. As of October 13, 1995, there were 3,400,000 issued and
outstanding Depositary Shares. According to the NYSE's published guidelines, the
NYSE would consider delisting the Depositary Shares if, among other things, the
number of publicly held Depositary Shares should fall below 100,000 or the
aggregate market value of publicly held Depositary Shares should fall below
$2,000,000. If, as a result of the purchase of Depositary Shares pursuant to the
Offer or otherwise, the listing of the Depositary Shares is discontinued, the
market for the Depositary Shares could be adversely affected. Termination of the
listing of the Depositary Shares on the NYSE would substantially reduce the
information required to be furnished by the Company to holders of the Depositary
Shares (although the Company would remain subject to the information
requirements of the NYSE and the reporting obligations under the Exchange Act
for so long as its shares of common stock, par value $1.00, or the depositary
shares, each representing one-fourth of a share of its 7% PRIDES, Series B
Convertible Preferred Stock, par value $1.00 per share (the "Series B
Convertible Preferred Stock"), continue to be listed on the NYSE and registered
pursuant to the Exchange Act).
In the event of the delisting of the Depositary Shares by the NYSE, it is
possible that the Depositary Shares would continue to trade on another
securities exchange or in the over-the-counter market and that price quotations
would be reported by such exchange, by the National Association of Securities
Dealers, Inc. (the "NASD") through the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or by other sources. The extent of
the public market for the Depositary Shares and the availability of such
quotations would, however, depend upon such factors as the number of holders of
Depositary Shares remaining at such time, the interest in maintaining a market
in the Depositary Shares on the part of securities firms, the possible
termination of registration under the Exchange Act as described below, and other
factors.
The Depositary Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System, which has
the effect, among other things, of allowing brokers to extend credit on the
collateral of such securities. If the Depositary Shares remain listed on the
NYSE, they will continue to be "margin securities." If the Depositary Shares
were delisted, depending upon factors similar to those described above, they
might no longer constitute "margin securities" and, therefore, could no longer
be used as collateral for loans made by brokers.
The Depositary Shares are currently registered under the Exchange Act.
Registration of the Depositary Shares under the Exchange Act may be terminated
upon application of the Company to the Securities and Exchange Commission (the
"Commission") if the Depositary Shares are neither listed on the NYSE or another
national securities exchange nor held of record by 300 or more persons.
Termination of registration of the Depositary Shares would make certain
provisions of the Exchange Act, such as the requirements of Rule 13e-3
thereunder with respect to "going private" transactions, no longer applicable in
respect of the Depositary Shares. If registration of the Depositary Shares under
the Exchange Act were terminated, the Depositary Shares would no longer be
"margin securities" or be eligible for NASDAQ reporting.
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All Depositary Shares purchased by the Company pursuant to the Offer will
be exchanged by the Company for the related shares of Series C Cumulative
Preferred Stock, which will, upon action by the Board, resume the status of
authorized and unissued shares of preferred stock of the Company without
designation as to series. Any share of Series C Cumulative Preferred Stock (and
the corresponding Depositary Shares) remaining outstanding after the Offer will
continue to be redeemable at the option of the Company on and after February 8,
1999, as described above under "Introduction". In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, and subject
to the rights of holders of any other series of Preferred Stock, the holders of
outstanding shares of Series C Cumulative Preferred Stock are entitled to
receive $100 per share (equivalent to $25 per Depositary Share), plus accrued
and unpaid dividends thereon, out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made to
holders of any capital stock, including, without limitation, the common stock of
the Company, ranking junior to the shares of Series C Cumulative Preferred Stock
as to the payment of dividends and the distribution of assets upon liquidation.
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION AS TO WHETHER ANY HOLDER OF DEPOSITARY SHARES SHOULD TENDER ANY
OR ALL OF SUCH HOLDER'S DEPOSITARY SHARES PURSUANT TO THE OFFER. HOLDERS OF
DEPOSITARY SHARES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER THEIR
DEPOSITARY SHARES AND, IF SO, THE NUMBER OF DEPOSITARY SHARES TO TENDER.

SECTION 2. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of certain of the United
States Federal income tax consequences of the Offer. This summary is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change. No rulings as to any of the matters discussed in this summary have
been requested or received from the Internal Revenue Service ("IRS").
EACH HOLDER OF DEPOSITARY SHARES IS URGED TO CONSULT AND RELY ON THE
HOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE HOLDER OF
TENDERING DEPOSITARY SHARES PURSUANT TO THE OFFER.
IN GENERAL. Sales of Depositary Shares by holders thereof pursuant to the
Offer will be taxable transactions for Federal income tax purposes and may also
be taxable transactions under applicable state, local, foreign and other tax
laws. This summary does not discuss any aspect of state, local or foreign tax
laws. The Federal income tax consequences to a holder of Depositary Shares may
vary depending upon the holder's particular facts and circumstances.
TREATMENT AS A SALE OR EXCHANGE. Under Section 302 of the Internal Revenue
Code of 1986, as amended (the "Code"), a sale of Depositary Shares pursuant to
the Offer will, as a general rule, be treated as a sale or exchange if the
receipt of cash upon the sale (i) results in a "complete termination" of the
holder's interest in the Company or (ii) is "not essentially equivalent to a
dividend" with respect to the holder. These tests (the "Section 302 tests") are
explained more fully below.
If either of the Section 302 tests is satisfied, a tendering holder of
Depositary Shares will ordinarily recognize gain or loss equal to the difference
between the amount of cash received by the holder pursuant to the Offer and the
holder's tax basis in the Depositary Shares sold pursuant to the Offer. If the
Depositary Shares are held as capital assets, the gain or loss will be capital
gain or loss, which will be long-term capital gain or long-term capital loss if
the Depositary Shares have been held for more than one year. A holder of
Depositary Shares will not be permitted to recognize loss on the sale of a
Depositary Share pursuant to the Offer if the holder purchases a Depositary
Share within a period beginning 30 days prior to and ending 30 days after the
completion of the Offer.
TREATMENT AS A DIVIDEND. If neither of the Section 302 tests is satisfied,
a tendering holder of Depositary Shares will be treated as having received a
dividend includible in gross income in an amount equal to the entire amount of
cash received by the holder pursuant to the Offer. This amount will not be
reduced by the holder's basis in the Depositary Shares sold pursuant to the
Offer, and (except as described below for corporate holders eligible for the
dividends-received deduction) the holder's basis in those Depositary Shares will
be added to the holder's basis in the holder's remaining Depositary Shares. No
assurance can be given that either of the Section 302 tests will be satisfied as
to any particular holder of Depositary Shares, and thus no assurance can be
given that any particular holder will not be treated as having received a
dividend taxable as ordinary income.
TAX RATES. Net capital gain (which is the excess of net long-term capital
gain over net short-term capital loss) of individuals, trusts and estates is
currently taxed at a maximum Federal income tax rate of 28%. Dividends and
short-term capital gains of individuals, trusts and estates are taxed at
ordinary income rates. Ordinary income is currently taxable to individuals,
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trusts and estates at a maximum Federal income tax rate of 39.6% (although it
may be taxed at higher marginal rates due to the phase-out of certain exemptions
and deductions). Capital gains and ordinary income of corporations are both
taxed at the same Federal income tax rate, currently a maximum of 35% (although
they may be taxed at higher marginal rates due to the phase-out of the 15%, 25%
and 34% brackets).
HOLDERS OF DEPOSITARY SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE POSSIBLE IMPACT OF THE RECEIPT OF CASH FROM THE COMPANY PURSUANT
TO THE OFFER ON THEIR OBLIGATION TO MAKE ESTIMATED TAX PAYMENTS.
CONSTRUCTIVE OWNERSHIP OF DEPOSITARY SHARES. In determining whether either
of the Section 302 tests is satisfied, a holder of Depositary Shares must take
into account not only Depositary Shares actually owned by the holder, but also
Depositary Shares that are constructively owned by the holder within the meaning
of Section 318 of the Code. Under Section 318, a holder may constructively own
Depositary Shares actually owned, and in some cases constructively owned, by
certain related individuals and certain entities in which the holder has an
interest, as well as any Depositary Shares the holder has a right to acquire by
exercise of an option.
THE SECTION 302 TESTS. One of the following tests must be satisfied in
order for the sale of Depositary Shares pursuant to the Offer to be treated as a
sale rather than as a dividend distribution.
A. COMPLETE TERMINATION TEST. The receipt of cash by a holder of
Depositary Shares will be a complete termination of the shareholder's
interest if either (i) all of the Depositary Shares actually and
constructively owned by the holder are sold pursuant to the Offer and the
holder actually and constructively owns no other stock of the Company, or
(ii) all of the Depositary Shares actually owned by the holder are sold
pursuant to the Offer, the holder is eligible to waive, and effectively
waives, the attribution of Depositary Shares constructively owned by the
holder in accordance with the procedures described in Section 302(c) of the
Code (relating to the waiver of family attribution), and the holder is not
considered to own any other Depositary Shares or any other stock of the
Company actually or constructively pursuant to other attribution rules
contained in Section 318 of the Code.
B. NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. The receipt of cash
by a holder of Depositary Shares will not be essentially equivalent to a
dividend if the holder's sale of Depositary Shares pursuant to the Offer
results in a "meaningful reduction" of the holder's proportionate interest
in the Company. Whether the receipt of cash by a holder of Depositary
Shares will result in a meaningful reduction of the holder's proportionate
interest will depend on the holder's particular facts and circumstances.
However, in the case of a small minority holder, even a small reduction may
satisfy this test when payments will not be pro rata with respect to all
outstanding Depositary Shares. The IRS has indicated in a published ruling
that, in the case of a small minority shareholder of a publicly-held
corporation who exercises no meaningful control over corporate affairs, a
reduction in the shareholder's proportionate interest in the corporation
from .0001118% to .0001081% (which represented only a 3.3% reduction in the
shareholder's percentage ownership of outstanding shares for purposes of
the substantially disproportionate test) would constitute a meaningful
reduction.
Holders of Depositary Shares should consult their tax advisors concerning
the application of the Section 302 tests to their particular circumstances.
Under certain circumstances, it may be possible for a tendering holder of
Depositary Shares to satisfy one of the Section 302 tests by contemporaneously
selling or otherwise disposing of all or some of the Depositary Shares or shares
of other stock of the Company that are actually or constructively owned by the
holder but that are not tendered pursuant to or eligible for the Offer.
Correspondingly, a holder may not be able to satisfy any of the Section 302
tests because of contemporaneous acquisitions of Depositary Shares or other
stock of the Company by the holder or by a related party whose Depositary Shares
or other stock of the Company are constructively owned by the holder. Holders of
Depositary Shares should consult their tax advisors regarding the consequences
of such sales or acquisitions in their particular circumstances.
SPECIAL RULES FOR CORPORATE HOLDERS OF DEPOSITARY SHARES. If the sale of
Depositary Shares by a corporate holder of Depositary Shares does not satisfy
any of the Section 302 tests and is therefore treated as a dividend, the holder
that is a corporation may be entitled to a dividends-received deduction equal to
70% of the dividend. There are a number of limitations on the availability of
the dividends-received deduction, however. Section 246(c) of the Code disallows
the dividends-received deduction with respect to stock that is held for 45 days
or less. For this purpose, the length of time a corporation is considered to
have held stock may be reduced by periods during which the corporation's risk of
loss with respect to the stock is diminished due to the existence of certain
options or other transactions. Further, under Section 246A of the Code, if a
corporate holder of Depositary Shares has incurred indebtedness directly
attributable to an investment in Depositary Shares, the 70% dividends received
deduction may be reduced by a percentage generally computed based on the amount
of the
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<PAGE>
indebtedness and the corporation's adjusted tax basis in the Depositary Shares.
Finally, any amount that is received by a corporate holder of Depositary Shares
that is treated as a dividend likely will constitute an "extraordinary dividend"
under Section 1059 of the Code. As a result, a corporate holder of Depositary
Shares will be required to reduce its tax basis in its Depositary Shares (but
not below zero) by the non-taxed portion of the dividend (that is, the portion
of the dividend equal to the dividends-received deduction). If the non-taxed
portion of the dividend exceeds the corporate holder's tax basis in its
Depositary Shares, the excess generally will be subject to tax upon sale or
disposition of the Depositary Shares. Corporate holders are urged to consult
their tax advisors as to the effect of Section 1059 of the Code on their tax
basis in the Depositary Shares.
FOREIGN HOLDERS OF DEPOSITARY SHARES. The Company will assume that the sale
of Depositary Shares is a dividend as to foreign holders of Depositary Shares
and will therefore withhold Federal income tax at a rate equal to 30% of the
gross proceeds paid to a foreign holder or such holder's agent pursuant to the
Offer, unless the Depositary determines that a reduced rate of withholding is
available pursuant to a tax treaty or that an exemption from withholding is
applicable because the gross proceeds are effectively connected with the conduct
of a trade or business by the foreign holder within the United States. For this
purpose, a foreign holder of Depositary Shares is any holder that is not (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, or (iii) any estate or trust the income of
which is subject to United States Federal income taxation regardless of the
source of such income.
Generally, the determination of whether a reduced rate of withholding is
applicable is made by reference to a foreign holder's address or to a properly
completed Form 1001 furnished by the holder, and the determination of whether an
exemption from withholding is available on the grounds that gross proceeds paid
to a foreign holder are effectively connected with a United States trade or
business is made on the basis of a properly completed Form 4224 furnished by the
holder. The Depositary will determine a foreign holder's eligibility for a
reduced rate of, or exemption from, withholding by reference to the holder's
address and any Forms 1001 or 4224 submitted to the Depositary by a foreign
holder of Depositary Shares unless facts and circumstances indicate that such
reliance is not warranted or unless applicable law requires some other method
for determining whether a reduced rate of withholding is applicable. These forms
can be obtained from the Depositary. See "Instructions" in the Letter of
Transmittal.
A foreign holder of Depositary Shares with respect to whom tax has been
withheld may be eligible to obtain a refund from the IRS of all or a portion of
the withheld tax if the holder satisfies one of the Section 302 tests for
capital gain treatment or is otherwise able to establish that no tax or a
reduced amount of tax was due. Foreign holders of Depositary Shares are urged to
consult their own tax advisors regarding the application of United States
Federal income tax withholding, including eligibility for a withholding tax
reduction or exemption and the refund procedure.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH HOLDER OF DEPOSITARY SHARES IS URGED TO CONSULT THE
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THE
HOLDER (INCLUDING THE APPLICABILITY AND EFFECT OF THE CONSTRUCTIVE OWNERSHIP
RULES AND STATE, LOCAL AND FOREIGN TAX LAWS) OF THE SALE OF DEPOSITARY SHARES
PURSUANT TO THE OFFER.

SECTION 3. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS; NO APPRAISAL
RIGHTS
The Company is not aware of any license or regulatory permit material to
its business that might be adversely affected by its acquisition of Depositary
Shares as contemplated in the Offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the Company's acquisition or
ownership of Depositary Shares pursuant to the Offer. The Company cannot predict
whether it may determine that it is required to delay the acceptance for payment
of, or payment for, Depositary Shares tendered pursuant to the Offer pending the
outcome of any such matter. There can be no assurance that any approval or other
action, if needed, would be obtained or would be obtained without substantial
conditions or that the failure to obtain any approval or other action might not
result in adverse consequences to the Company's business.
The Company intends to make all required filings under the Exchange Act.
The Company's obligation under the Offer to accept for payment, or make
payment for, Depositary Shares is subject to certain conditions. See Section 8.
No approval of the holders of a majority of the Depositary Shares, whether
affiliated or unaffiliated, or of any holders of any of the Company's securities
is required in connection with the Offer.
No appraisal rights are available to holders of Depositary Shares in
connection with the Offer.
7
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THE OFFER
SECTION 4. EXPIRATION DATE; EXTENSION OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of the extension or
amendment), the Company will accept for payment, and will pay for, Depositary
Shares validly tendered and not withdrawn on or prior to the Expiration Date at
the Purchase Price. The term "Expiration Date" means 12:00 midnight, Eastern
Time, on November 15, 1995, unless the Company shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall refer to the latest time and date at which the Offer, as so extended by
the Company, shall expire. See Section 13 for a description of the Company's
right to extend the time during which the Offer is open and to delay, terminate
or amend the Offer. See also Section 8.
The Company expressly reserves the right, in its sole discretion, at any
time or from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof. See Section 13.
If (i) the Company (x) increases or decreases the price to be paid for
Depositary Shares, (y) decreases the number of Depositary Shares being sought,
or (z) increases or decreases the Soliciting Dealers' fee, and (ii) the Offer is
scheduled to expire at any time earlier than the tenth business day from and
including the date that notice of such increase or decrease is first published,
sent or given in the manner specified in Section 13, the Offer will be extended
until the expiration of such ten-business-day period. For purposes of the Offer,
"business day" means any day other than a Saturday, Sunday or Federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern
Time.
All Depositary Shares purchased pursuant to the Offer will be purchased at
the Purchase Price, net to the seller in cash. All Depositary Shares not
purchased pursuant to the Offer, including Depositary Shares tendered and
withdrawn, will be returned to the tendering holders at the Company's expense
promptly after expiration of the Offer.

SECTION 5. PROCEDURE FOR TENDERING DEPOSITARY SHARES
TENDER OF DEPOSITARY SHARES. For Depositary Shares to be validly tendered
pursuant to the Offer:
(i) the depositary receipts for such Depositary Shares (or confirmation of
receipt of such Depositary Shares pursuant to the procedures for
book-entry transfer set forth below), together with a properly
completed and duly executed Letter of Transmittal, any required
signature guarantees, and any other documents required by the Letter
of Transmittal, must be received on or prior to the Expiration Date by
the Depositary at one of its addresses set forth on the back cover of
this Offer to Purchase; or
(ii) the tendering holder of Depositary Shares must comply with the
guaranteed delivery procedure set forth below.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. Signatures on all Letters of
Transmittal must be guaranteed by a financial institution (including most banks,
savings and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program (an
"Eligible Institution"), except in cases in which Depositary Shares are tendered
(i) by a registered holder who has not completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. If a depositary receipt representing the Depositary Shares
is registered in the name of a person other than the signer of the Letter of
Transmittal, or if depositary receipts representing unpurchased Depositary
Shares are to be issued to a person other than the registered owner(s), the
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the depositary receipts, with the signature(s) on the
depositary receipts or stock powers guaranteed as aforesaid.
THE METHOD OF DELIVERY OF DEPOSITARY RECEIPTS AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF DEPOSITARY
SHARES, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
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BOOK-ENTRY DELIVERY. The Depositary will establish accounts with respect to
the Depositary Shares at each of The Depository Trust Company, the Midwest
Securities Trust Company and the Philadelphia Depository Trust Company
(collectively, the "Depository Institutions", and individually, a "Depository
Institution") for purposes of the Offer within two business days after the date
of this Offer to Purchase, and any financial institution that is a participant
in a Depository Institution's system may make book-entry delivery of the
Depositary Shares by causing the Depository Institution to transfer such
Depositary Shares into the Depositary's account in accordance with the
Depository Institution's procedure for such transfer. However, although delivery
of Depositary Shares may be effected through book-entry transfer into the
Depositary's account at one of the Depository Institutions, the Letter of
Transmittal, with any required signature guarantees and other required
documents, must, in any case, be transmitted to and received by the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase on
or prior to the Expiration Date, or the guaranteed delivery procedure set forth
below must be followed. Delivery of the Letter of Transmittal and any other
required documents to one of the Depository Institutions does not constitute
delivery to the Depositary.
GUARANTEED DELIVERY. If a holder desires to tender Depositary Shares
pursuant to the Offer and the holder's depositary receipts are not immediately
available (or the procedures for book-entry transfer cannot be completed on a
timely basis) or time will not permit all required documents to reach the
Depositary before the Expiration Date, the holder's Depositary Shares may
nevertheless be tendered provided that all of the following conditions are
satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) the Depositary receives (by hand, mail or facsimile transmission), on
or prior to the Expiration Date, a properly completed and duly
executed Notice of Guaranteed Delivery substantially in the form the
Company has provided with this Offer to Purchase; and
(iii) the depositary receipts for all tendered Depositary Shares in proper
form for transfer (or confirmation of book-entry transfer of the
Depositary Shares into the Depositary's account at one of the
Depository Institutions), together with a properly completed and duly
executed Letter of Transmittal, with any required signature
guarantees and any other documents required by the Letter of
Transmittal, are received by the Depositary within three NYSE trading
days after the date of execution of such Notice of Guaranteed
Delivery.
DETERMINATIONS OF VALIDITY; REJECTION OF DEPOSITARY SHARES; WAIVER OF
DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the
validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of Depositary Shares will be determined by the Company, in
its sole discretion, which determination shall be final and binding on all
parties. The Company reserves the absolute right, in its sole discretion, to
reject any or all tenders it determines not to be in proper form or the
acceptance for payment of which may, in the view of the Company or its counsel,
be unlawful. The Company also reserves the absolute right, in its sole
discretion, to waive any of the conditions of the Offer and any irregularity in
the tender of any particular Depositary Shares. No tender of Depositary Shares
will be deemed to be properly made until all irregularities have been cured or
waived. None of the Company, the Depositary, the Information Agent, the Dealer
Manager or any other person is or will be obligated to give notice of any
irregularity in tenders, and none of them will incur any liability for failure
to give any such notice.

SECTION 6. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 6, a tender of Depositary
Shares pursuant to the Offer is irrevocable. Depositary Shares tendered pursuant
to the Offer may be withdrawn at any time on or prior to the Expiration Date
and, unless theretofore accepted for payment by the Company, may also be
withdrawn after 12:00 midnight, Eastern Time, on December 11, 1995.
For a withdrawal to be effective, the Depositary must timely receive (at
one of its addresses set forth on the back cover of this Offer to Purchase) a
written or facsimile transmission notice of withdrawal. A notice of withdrawal
must specify the name of the person who tendered the Depositary Shares to be
withdrawn, the number of Depositary Shares to be withdrawn and the name of the
registered owner, if different from that of the person who tendered such
Depositary Shares. If the depositary receipts have been delivered or identified
in a Notice of Guaranteed Delivery to the Depositary, then, prior to the release
of such depositary receipts, the tendering holder must also submit the serial
numbers shown on the particular depositary receipts evidencing the Depositary
Shares, and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of Depositary Shares tendered by an
Eligible Institution). If Depositary Shares have been delivered pursuant to the
procedure for book-entry transfer set forth in Section 5, the notice of
withdrawal must specify
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the name and the number of the account at the Depository Institution to be
credited with the withdrawn Depositary Shares and otherwise comply with the
procedures of the Depository Institution.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company, in its sole discretion,
which determination shall be final and binding on all parties. The Company
reserves the right to reject any and all notices of withdrawal it determines not
to be in proper form. The Company also reserves the absolute right to waive any
irregularity in a notice of withdrawal. No notice of withdrawal will be deemed
to be properly made unless any such irregularity has been cured or waived during
the period in which withdrawals of tenders may be made. None of the Company, the
Depositary, the Information Agent, the Dealer Manager or any other person is or
will be obligated to give any notice of any irregularity in any notice of
withdrawal, and none of them will incur any liability for failure to give any
such notice. A withdrawal of a tender of Depositary Shares may not be rescinded,
and Depositary Shares properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. Withdrawn Depositary Shares may again be
tendered on or prior to the Expiration Date by following any of the procedures
described in Section 5.

SECTION 7. ACCEPTANCE FOR PAYMENT OF DEPOSITARY SHARES AND PAYMENT OF PURCHASE
PRICE
Upon the terms and subject to the conditions of the Offer, promptly after
the Expiration Date, the Company will purchase and pay the Purchase Price for
any and all Depositary Shares (subject to certain matters discussed in Section 4
and Section 13) as are properly tendered and not withdrawn as permitted in
Section 6. For purposes of the Offer, the Company will be deemed to have
accepted for payment (and thereby purchased) Depositary Shares that are tendered
and not withdrawn when, as and if it gives oral or written notice to the
Depositary of its acceptance of the Depositary Shares for payment pursuant to
the Offer.
Payment for Depositary Shares purchased pursuant to the Offer will be made
by the Company by depositing the aggregate Purchase Price with the Depositary,
which will act as agent for tendering holders of Depositary Shares for the
purpose of receiving payment from the Company and transmitting payment to the
tendering holders. Notwithstanding any other provision hereof, payment for
Depositary Shares accepted for payment pursuant to the Offer will in all cases
be made only after timely receipt by the Depositary of depositary receipts for
such Depositary Shares (or a timely confirmation by a Depository Institution of
book-entry transfer of such Depositary Shares to the Depositary), a properly
completed and duly executed Letter of Transmittal with any required signature
guarantees and any other required documents. Under no circumstances will
interest be paid on the Purchase Price of the Depositary Shares to be paid by
the Company, regardless of any delay in making the payment.
The Company will pay any stock transfer taxes with respect to the transfer
and sale of Depositary Shares to it pursuant to the Offer. If, however, payment
of the Purchase Price is to be made to, or if depositary receipts for Depositary
Shares not tendered or accepted for purchase are to be registered in the name
of, any person other than the registered holder, or if tendered depositary
receipts are registered in the name of any person other than the person signing
the Letter of Transmittal, the amount of any stock transfer taxes (whether
imposed on the registered holder or such person) payable on account of the
transfer to such person will be deducted from the Purchase Price unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted. See Instruction 6 of the Letter of Transmittal.
To prevent backup Federal income tax withholding with respect to the
purchase price of Depositary Shares purchased pursuant to the Offer, a holder of
Depositary Shares (except as set forth herein) must provide the Depositary with
the holder's correct taxpayer identification number and certify whether the
holder is subject to backup withholding of Federal income tax by completing the
substitute Form W-9 included in the Letter of Transmittal. Certain holders of
Depositary Shares (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements (although foreign individuals are subject to other withholding
requirements. See Section 2). In order for a foreign individual to qualify as an
exempt recipient, the holder must submit a Form W-8, Certificate of Foreign
Status, signed under penalties of perjury, attesting to that individual's exempt
status. Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of Federal income tax, the Depositary will be
required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder of Depositary Shares or other payee pursuant to the Offer
unless the holder or other payee certifies that such person is not otherwise
subject to backup withholding, provides such person's tax identification number
(social security number or employer identification number) and certifies that
such number is correct. Each tendering holder of Depositary Shares should
complete and sign the main signature form and, other than a noncorporate foreign
holder, the Substitute Form W-9 included as part of the Letter of Transmittal,
so as to provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a
10

<PAGE>
manner satisfactory to the Company and the Depositary. Noncorporate foreign
holders of Depositary Shares should generally complete and sign a Form W-8, a
copy of which may be obtained from the Depositary, in order to avoid backup
withholding.
ANY TENDERING HOLDER OF DEPOSITARY SHARES OR OTHER PAYEE WHO FAILS TO
COMPLETE FULLY AND SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL (OR, IN THE CASE OF A FOREIGN INDIVIDUAL, FORM W-8 OBTAINABLE FROM
THE DEPOSITARY) MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING ON THE
GROSS PROCEEDS PAID TO THE HOLDER OF DEPOSITARY SHARES OR OTHER PAYEE PURSUANT
TO THE OFFER.

SECTION 8. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) the Company's right to extend or amend the Offer at any
time in its sole discretion, the Company shall not be required to accept for
payment or make payment for any Depositary Shares tendered, and may terminate or
amend the Offer, if before acceptance for payment or payment for any such
Depositary Shares any of the following shall have occurred (or shall have been
determined by the Company to have occurred):
(i) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person,
domestic or foreign, before any court or governmental, regulatory or
administrative authority, agency or tribunal, domestic or foreign,
that (x) challenges the making of the Offer, the acquisition of
Depositary Shares pursuant to the Offer or otherwise relates in any
manner to the Offer, or (y) in the sole judgment of the Company, could
materially adversely affect the business, condition (financial or
other), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of the Company or
any of its subsidiaries or materially impair the Offer's contemplated
benefits to the Company;
(ii) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order
or injunction threatened, proposed, sought, promulgated, enacted,
entered, amended, enforced or deemed to be applicable to the Offer or
the Company or any of its subsidiaries, by any court or any
government or governmental, regulatory or administrative authority,
agency or tribunal, domestic or foreign, that, in the Company's sole
judgment, would or might directly or indirectly (w) make the
acceptance for payment of, or payment for, Depositary Shares illegal
or otherwise restrict or prohibit consummation of the Offer, (x)
delay or restrict the ability of the Company, or render the Company
unable, to accept for payment, or pay for, Depositary Shares, (y)
materially impair the contemplated benefits of the Offer to the
Company, or (z) materially adversely affect the business, condition
(financial or other), income, operations or prospects of the Company
and its subsidiaries, taken as a whole, or otherwise materially
impair in any way the contemplated future conduct of the business of
the Company or any of its subsidiaries;
(iii) there shall have occurred after October 13, 1995, (s) any general
suspension of trading in, or limitation on prices for, securities on
any United States national securities exchange or in the
over-the-counter market (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market
index), (t) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (u)
the commencement of a war, armed hostilities or other international
or national crisis directly or indirectly involving the United
States, (v) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on,
or any event that, in the sole judgment of the Company, might
affect, the extension of credit by banks or other lending
institutions in the United States, (w) any significant decrease in
the market price of the Depositary Shares, (x) any change in the
general political, market, economic or financial conditions in the
United States or abroad that could, in the sole judgment of the
Company, have a material adverse effect on the Company's business,
operations, prospects or the trading in the Depositary Shares, (y)
in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening
thereof, or (z) any decline in either the Dow Jones Industrial
Average (4793.78 at the close of business on October 13, 1995) or
the Standard and Poor's Index of 500 Industrial Companies (584.50 at
the close of business on October 13, 1995) by an amount in excess of
15% measured from the close of business on October 13, 1995;
(iv) after October 13, 1995, any tender or exchange offer with respect to
the Depositary Shares (other than the Offer) or any other class of
the Company's equity securities, or any merger, acquisition, business
combination or other similar transaction with or involving the
Company or any subsidiary, shall have been proposed, announced or
made by any person or entity;
11

<PAGE>
(v) the Company shall not have declared and set aside for payment the
dividends on the Company's Junior Participating Preferred Stock,
Series A, par value $1.00 per share, the Series B Convertible
Preferred Stock, or the Series C Cumulative Preferred Stock for the
quarterly period beginning in October 1995;
(vi) after October 13, 1995, any change shall occur or be threatened in
the business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries taken as a whole,
which, in the sole judgment of the Company, is or may be material to
the Company; or
(vii) (x) any person, entity or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) shall have acquired, or proposed to
acquire, beneficial ownership of stock possessing more than 5% of the
aggregate voting power of all classes of the Company's stock then
outstanding (other than a person, entity or group which had publicly
disclosed such ownership in a Schedule 13D or 13G (or an amendment
thereto) on file with the Securities and Exchange Commission prior to
October 16, 1995), (y) any new group shall have been formed that
beneficially owns stock possessing more than 5% of the aggregate
voting power of all classes of the Company's stock then outstanding,
or (z) any person, entity or group shall have filed a Notification
and Report Form under the Hart-Scott-Rodino Antitrust Improvement Act
of 1976, or made a public announcement, reflecting an intent to
acquire the Company or any of its subsidiaries or any of their
respective assets or securities; and, in the sole judgment of the
Company, in any such case and regardless of the circumstances
(including any action or inaction by the Company) giving rise to such
condition, such event makes it inadvisable to proceed with the Offer
or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition, and any such
condition may be waived by the Company, in whole or in part, at any time and
from time to time in its sole discretion; provided, however, that the Exchange
Act and the rules and regulations promulgated thereunder require that all
conditions to the Offer, other than those relating to the receipt of certain
necessary governmental approvals, must be satisfied or waived on or prior to the
Expiration Date. The Company's failure at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts or circumstances; and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time by the Company in its sole discretion. Any determination by
the Company concerning the events described above and any related judgment by
the Company regarding the inadvisability of proceeding with the acceptance for
payment or payment for any tendered Depositary Shares will be final and binding
on all parties.

SECTION 9. PRICE RANGE OF THE DEPOSITARY SHARES; DIVIDENDS
The Depositary Shares are listed and traded on the NYSE. The following
table sets forth, for each period shown, the high and low sales prices of the
Depositary Shares as reported on the NYSE Composite Tape and the dividends paid
per Depositary Share. The Depositary Shares were first traded on February 2,
1994.
<TABLE>
<CAPTION>
DEPOSITARY SHARE
PRICE RANGE DIVIDENDS PAID PER
HIGH LOW DEPOSITARY SHARE*
<S> <C> <C> <C>
1994
1st Quarter......................................................................... $25.375 $23.375 $0.391
(commencing February 2)
2nd Quarter......................................................................... $23.50 $22.00 $0.525
3rd Quarter......................................................................... $23.75 $22.00 $0.525
4th Quarter......................................................................... $23.50 $20.50 $0.525

1995
1st Quarter......................................................................... $25.00 $21.375 $0.525
2nd Quarter......................................................................... $26.50 $23.75 $0.525
3rd Quarter......................................................................... $26.625 $25.00 $0.525**
4th Quarter......................................................................... $26.50 $26.00 $0.00
(through October 13)
</TABLE>
* Quarterly accrued dividends are paid on the fifteenth day of January, April,
July and October, or if any such date is not a business day, on the next
succeeding business day.
** The Company expects to pay the regular quarterly cash dividend of $0.525 per
Depositary Share for the third quarter of 1995 on the payment date of October
16, 1995.
12

<PAGE>
On October 13, 1995, the last trading day before the Company announced the
Offer, the closing sales price of the Depositary Shares as reported on the NYSE
Composite Tape was $26.50 per Depositary Share. Holders are urged to obtain a
current market quotation for the Depositary Shares. As of October 13, 1995, the
Company had issued and outstanding 3,400,000 Depositary Shares. As of the most
recent dividend record date, September 11, 1995, there were 73 record holders of
Depositary Shares.
Holders of record of the shares of Series C Cumulative Preferred Stock (and
thereby holders of Depositary Shares) shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available therefor,
cash dividends at the rate of 8.40% of the stated liquidation preference per
annum (equivalent to $2.10 per annum or $0.525 per quarter for each Depositary
Share), payable quarterly in arrears on the fifteenth day of January, April,
July and October or, if any such date is not a business day, on the next
succeeding business day. Dividends are payable to holders of record of shares of
Series C Cumulative Preferred Stock as they appear on the stock register of the
Company (and to holders of record of Depositary Shares as they appear on the
register of the Depositary) on such record dates, not less than 15 nor more than
60 days preceding the payment date thereof, as shall be fixed by the Board of
Directors.
The Company's ability to continue to pay dividends on any of its Series C
Cumulative Preferred Stock depends on its maintaining adequate net worth and
compliance with the required ratio of total debt to total capital as defined in
and required by the Company's current credit agreement (the "Credit Agreement").
The Credit Agreement requires the Company to maintain a minimum net worth
(generally defined therein as common shareholders' equity plus any outstanding
preferred stock) of $800 million plus 50% of net income for the fiscal quarters
from and including the third fiscal quarter in 1995 if net income is positive.
In addition, the Credit Agreement imposes a maximum 60% ratio of total debt to
total capital (defined therein as total debt plus net worth). At September 30,
1995, the net worth of the Company and the ratio of total debt to total capital
were $1.2 billion and 41%, respectively. The Company's ability to continue to
pay dividends on or to purchase, redeem or otherwise acquire any of its Series C
Cumulative Preferred Stock also depends on its having declared or paid full or
pro rata dividends on its other classes of preferred stock, having paid or set
aside all required amounts for purchase, retirement and sinking funds for its
other classes of preferred stock, and not being in default on any of its
obligations to redeem any shares of any of its classes of preferred stock.
Dividends on shares of Series C Cumulative Preferred Stock accrue whether
or not funds are legally available for the payment of the dividends and whether
or not dividends are declared. Accrued but unpaid dividends on shares of Series
C Cumulative Preferred Stock cumulate as of the dividend payment date on which
they first become payable, but no interest accrues on accumulated but unpaid
dividends on shares of Series C Cumulative Preferred Stock.
The record date for the 1995 third quarter regular quarterly cash dividend
of $0.525 for the Series C Cumulative Preferred Stock is September 11, 1995, and
the related payment date is October 16, 1995. Accordingly, holders of record as
of September 11, 1995, of Depositary Shares tendered and purchased by the
Company will receive and be entitled to such regular quarterly dividend to be
paid by the Company for the third quarter of 1995, but will not receive any
accrued dividends for the fourth quarter of 1995.
SECTION 10. CERTAIN INFORMATION CONCERNING THE COMPANY
Bowater Incorporated is the largest producer of newsprint in the United
States, and also makes coated and uncoated groundwood papers, bleached kraft
pulp, continuous computer forms and lumber products. It has five paper mills,
eight converting plants and 3.7 million acres of timberlands in the United
States and Canada. Bowater Incorporated common stock is listed on the New York
Stock Exchange, United States regional exchanges, the London Stock Exchange and
the Swiss Stock Exchanges. The Company's principal executive offices are located
at 55 East Camperdown Way, Greenville, South Carolina 29602.
SUMMARY HISTORICAL FINANCIAL INFORMATION
Set forth below is certain summary consolidated historical financial
information for the Company and its subsidiaries. The historical financial
information at and for the years ended December 31, 1994, and December 31, 1993,
has been summarized from the Company's audited consolidated financial statements
incorporated by reference in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994 (the "1994 10-K"). The historical financial
information at and for the six months ended June 30, 1995, and July 2, 1994, has
been summarized from the Company's unaudited consolidated financial statements
as set forth in the Company's Quarterly Report on Form 10-Q for the six months
ended June 30, 1995 (the "1995 Second Quarter 10-Q"). The following summary
historical financial information should be read in conjunction
13

<PAGE>
with, and is qualified in its entirety by reference to, such audited and
unaudited consolidated financial statements and their related notes. See
"Additional Information" below.
BOWATER INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, JULY 2, DECEMBER 31,
1995 1994 1994 1993
<S> <C> <C> <C> <C>
(UNAUDITED)
Net Sales................................................................ $936,314 $628,958 $1,358,996 $1,353,684
Costs and expenses....................................................... 721,381 649,374 1,316,896 1,417,016
Operating income (loss).................................................. 214,933 (20,416) 42,100 (63,332)
Other expense (income), principally interest............................. 35,172 43,142 48,935 45,704
Income taxes............................................................. 66,512 (23,515) (4,783) (34,886)
Minority interests....................................................... 8,365 (3,722) 2,772 (9,651)
Income (loss) before extraordinary charge................................ 104,884 (36,321) (4,824) (64,499)
Extraordinary charge, net of taxes of $3,808 (1)......................... (6,084) -- -- --
Net income (loss)........................................................ 98,800 (36,321) (4,824) (64,499)
Dividends and accretion on preferred stock............................... 5,703 7,512 16,925 2,393
Net income (loss) available to common shareholders....................... $ 93,097 $(43,833) $ (21,749) $ (66,892)
Income (loss) per common and common equivalent share:
Income (loss) before extraordinary charge.............................. $ 2.37 $ (1.20) $ (0.59) $ (1.84)
Extraordinary charge (1)............................................... (0.15) -- -- --
Net income (loss)................................................... $ 2.22 $ (1.20) $ (0.59) $ (1.84)
Average common and common equivalent shares outstanding (000)............ 41,903 36,480 36,566 36,368
Income (loss) per common share -- assuming full dilution:
Income (loss) before extraordinary charge.............................. $ 2.30 $ (1.20) $ (0.59) $ (1.84)
Extraordinary charge (1)............................................... (0.14) -- -- --
Net income (loss)................................................... $ 2.16 $ (1.20) $ (0.59) $ (1.84)
Average common and common equivalent shares outstanding (000)............ 43,175 36,480 36,566 36,368
</TABLE>

(1) On March 7, 1995, the Company completed an offer repurchasing approximately
$182 million of the Company's $200 million principal amount of 8.5% notes
previously outstanding. As a result, the Company recorded an extraordinary
charge of $6,084,000, net of taxes of $3,808,000, for the premium and
expenses relating to the repurchase. On a fully diluted basis, the earnings
per share effect was $0.14.
14

<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, JULY 2, DECEMBER 31,
1995 1994 1994 1993
<S> <C> <C> <C> <C>
Earnings:
Pre-tax income (loss)...................................................... $179,761 $(63,558) $ (6,835) $(109,036)
Add:
Fixed charges (see below)............................................... 62,438 64,763 132,169 109,999
Amortization of capitalized interest.................................... 1,774 2,186 4,371 4,460
Less:
Capitalized interest.................................................... 567 131 315 2,184
Preferred stock dividends (pretax)...................................... 16,732 13,254 29,457 6,137
Total...................................................................... $226,674 $ (9,994) $ 99,933 $ (2,898)
Fixed Charges:
Interest expense -- net.................................................... $ 43,614 $ 49,603 $ 98,848 $ 98,333
Capitalized interest....................................................... 567 131 315 2,184
Portion of rental expense representative of interest....................... 1,525 1,775 3,549 3,345
Preferred stock dividends (pretax)......................................... 16,732 13,254 29,457 6,137
Total...................................................................... $ 62,438 $ 64,763 $132,169 $ 109,999
Ratio...................................................................... 3.63 -0.15 0.76 -0.03
Dollar amount of coverage deficiency....................................... N/A $ 74,757 $ 32,236 $ 112,897
</TABLE>

<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
(UNAUDITED)
Cash............................................................................... $ 15,604 $ 10,783 $ 16,258
Marketable securities.............................................................. 155,285 143,985 65,408
Accounts receivable................................................................ 214,563 197,473 170,737
Inventories........................................................................ 160,240 151,097 149,431
Other current assets............................................................... 15,523 10,487 17,643
Total current assets........................................................ 561,215 513,825 419,477
Fixed assets, net.................................................................. 1,742,361 1,785,046 1,750,719
Other assets....................................................................... 500,757 497,770 498,774
Total tangible assets....................................................... 2,804,333 2,796,641 2,668,970
Intangible assets.................................................................. 53,477 54,721 57,208
Total assets................................................................ $2,857,810 $2,851,362 $2,726,178
Current installments of long-term debt............................................. $ 1,604 $ 1,604 $ 1,796
Accounts payable and accrued liabilities........................................... 260,002 209,008 237,507
Total current liabilities................................................... 261,606 210,612 239,303
Long-term debt, net of current installments........................................ 934,104 1,116,887 1,118,403
Other long-term liabilities........................................................ 593,034 561,946 561,616
Redeemable LIBOR preferred stock................................................... 74,556 74,492 74,368
Shareholders' equity:
Series B convertible preferred stock............................................... 111,333 111,333 --
Series C cumulative preferred stock................................................ 81,892 81,892 --
Common stock....................................................................... 38,262 37,121 36,913
Additional paid-in capital......................................................... 363,176 336,990 332,661
Other shareholders' equity......................................................... 399,847 320,089 362,914
Total shareholders' equity.................................................. 994,510 887,425 732,488
Total liabilities and shareholders' equity.................................. $2,857,810 $2,851,362 $2,726,178
Working capital.................................................................... $ 299,609 $ 303,213 $ 180,174
Total debt......................................................................... $ 935,708 $1,118,491 $1,120,199
Book value per share:
Common shareholders' equity........................................................ $ 801,285 $ 694,200 $ 732,488
Common shares outstanding (000).................................................... 37,849 36,698 36,439
Book value per share............................................................... $ 21.17 $ 18.92 $ 20.10
</TABLE>

<PAGE>
PRO FORMA FINANCIAL INFORMATION
Set forth below is pro forma data, reflecting consummation of the Offer,
for the summary financial information set forth above for the most recent fiscal
year and interim period for which information is available.

BOWATER INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1995 ADJUSTMENTS (1) JUNE 30, 1995
<S> <C> <C> <C>
Net Sales................................. $ 936,314 $ 936,314
Costs and expenses........................ 721,381 721,381
Operating income (loss)................... 214,933 214,933
Other expense (income), principally
interest................................ 35,172 35,172
Income taxes.............................. 66,512 66,512
Minority interests........................ 8,365 8,365
Income (loss) before extraordinary
charge.................................. 104,884 104,884
Extraordinary charge, net of taxes of
$3,808 (3).............................. (6,084) (6,084)
Net income (loss)......................... 98,800 98,800
Dividends and accretion on preferred
stock................................... 5,703 (3,570)(4) 2,133
Premium and expenses paid to retire Series
C Cumulative Preferred Stock............ 0 14,773(5) 14,773
Net income (loss) available to common
shareholders............................ $ 93,097 11,203 $ 81,894
Income (loss) per common and common
equivalent share:
Income (loss) before extraordinary
charge................................ $ 2.37 0.27 $ 2.10
Extraordinary charge (3)................ (0.15) -- (0.15)
Net income (loss)................... $ 2.22 0.27 $ 1.95
Average common and common equivalent
shares outstanding (000)................ 41,903 -- 41,903
Income (loss) per common share -- assuming
full dilution:
Income (loss) before extraordinary
charge................................ $ 2.30 0.26 $ 2.04
Extraordinary charge (3)................ (0.14) -- (0.14)
Net income (loss)..................... $ 2.16 0.26 $ 1.90
Average common and common equivalent
shares outstanding (000)................ 43,175 -- 43,175
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 ADJUSTMENTS (2) 1994
<S> <C> <C> <C>
Net Sales................................. $1,358,996 $1,358,996
Costs and expenses........................ 1,316,896 1,316,896
Operating income (loss)................... 42,100 42,100
Other expense (income), principally
interest................................ 48,935 48,935
Income taxes.............................. (4,783) (4,783)
Minority interests........................ 2,772 2,772
Income (loss) before extraordinary
charge.................................. (4,824) (4,824)
Extraordinary charge, net of taxes of
$3,808 (3).............................. -- --
Net income (loss)......................... (4,824) (4,824)
Dividends and accretion on preferred
stock................................... 16,925 (6,684)(4) 10,241
Premium and expenses paid to retire Series
C Cumulative Preferred Stock............ 0 14,773(5) 14,773
Net income (loss) available to common
shareholders............................ $ (21,749) 8,089 $ (29,838)
Income (loss) per common and common
equivalent share:
Income (loss) before extraordinary
charge................................ $ (0.59) 0.22 $ (0.81)
Extraordinary charge (3)................ -- -- --
Net income (loss)................... $ (0.59) 0.22 $ (0.81)
Average common and common equivalent
shares outstanding (000)................ 36,566 -- 36,566
Income (loss) per common share -- assuming
full dilution:
Income (loss) before extraordinary
charge................................ $ (0.59) $ (0.81)
Extraordinary charge (3)................ -- 0.22 --
Net income (loss)..................... $ (0.59) -- $ (0.81)
Average common and common equivalent
shares outstanding (000)................ 36,566 -- 36,566
</TABLE>

(1) The pro forma adjustments assume that the Offer was consummated on January
1, 1995.
(2) The pro forma adjustments assume that the Offer was consummated on February
1, 1994 (the date of original issuance of the Depositary Shares) after
incurrence of the costs of the original issuance.
(3) On March 7, 1995, the Company completed an offer repurchasing approximately
$182 million of the Company's $200 million principal amount of 8.5% notes
previously outstanding. As a result, the Company recorded an extraordinary
charge of $6,084,000, net of taxes of $3,808,000, for the premium and
expenses relating to the repurchase. On a fully diluted basis, the earnings
per share effect was $0.14.
(4) Elimination of Series C Cumulative Preferred Stock dividends.
(5) Estimated retained earnings charge for premium paid to preferred
shareholders ($9,775,000), write-off of issuance costs ($3,108,234), and
recognition of estimated expenses of ($1,890,000), assuming 3,400,000
Depositary Shares are tendered at $27.875 per share.
17

<PAGE>
BOWATER INCORPORATED
PRO FORMA RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT RATIOS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1995 ADJUSTMENTS (1) JUNE 30, 1995
<S> <C> <C> <C>
Earnings:
Pre-tax income (loss).......... $ 179,761 $ 179,761
Add:
Fixed charges (see below).... 62,438 (5,805)(3) 56,633
Amortization of capitalized
interest................... 1,774 1,774
Less:
Capitalized interest......... 567 567
Preferred stock dividends
(pre-tax).................. 16,732 (5,805) 10,927
Total.......................... $ 226,674 0 $ 226,674
Fixed Charges:
Interest expense -- net........ $ 43,614 $ 43,614
Capitalized interest........... 567 567
Portion of rental expense
representative of interest... 1,525 1,525
Preferred stock dividends
(pretax)..................... 16,732 (5,805) 10,927
Total.......................... $ 62,438 (5,805) $ 56,633
Ratio.......................... 3.63 0.37 4.00
Dollar amount of coverage
deficiency................... N/A N/A N/A
</TABLE>

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 ADJUSTMENTS (2) 1994
<S> <C> <C> <C>
Earnings:
Pre-tax income (loss).......... $ (6,835) $ (6,835)
Add:
Fixed charges (see below).... 132,169 (10,868)(3) 121,301
Amortization of capitalized
interest................... 4,371 4,371
Less:
Capitalized interest......... 315 315
Preferred stock dividends
(pre-tax).................. 29,457 (10,868) 18,589
Total.......................... $ 99,933 0 $ 99,933
Fixed Charges:
Interest expense -- net........ $ 98,848 $ 98,848
Capitalized interest........... 315 315
Portion of rental expense
representative of interest... 3,549 3,549
Preferred stock dividends
(pretax)..................... 28,457 (10,868) 18,589
Total.......................... $ 132,169 (10,868) $ 121,301
Ratio.......................... 0.76 0.06 0.82
Dollar amount of coverage
deficiency................... $ 32,236 (10,868) $ 21,368
</TABLE>

<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

HISTORICAL PRO FORMA HISTORICAL
AT AT AT
JUNE 30, JUNE 30, DECEMBER 31,
1995 ADJUSTMENTS (1) 1995 1994 ADJUSTMENTS (2)
<S> <C> <C> <C> <C> <C>
Cash...................................... $ 15,604 $ 15,604 $ 10,783
Marketable securities..................... 155,285 (96,665)(3) 58,620 143,985 (96,665)(3)
Accounts receivable....................... 214,563 214,563 197,473
Inventories............................... 160,240 160,240 151,097
Other current assets...................... 15,523 15,523 10,487
Total current assets................ 561,215 (96,665) 464,550 513,825 (96,665)
Fixed assets, net......................... 1,742,361 1,742,361 1,785,046
Other assets.............................. 500,757 500,757 497,770
Total tangible assets............... 2,804,333 (96,665) 2,707,668 2,796,641 (96,665)
Intangible assets......................... 53,477 53,477 54,721
Total assets........................ $ 2,857,810 $ (96,665) $ 2,761,145 $2,851,362 $ (96,665)
Current instalments of long-term debt..... $ 1,604 $ 1,604 $ 1,604
Accounts payable and accrued
liabilities............................. 260,002 260,002 209,008
Total current liabilities........... 261,606 261,606 210,612
Long-term debt, net of current
instalments............................. 934,104 934,104 1,116,887
Other long-term liabilities............... 593,034 593,034 561,946
Redeemable LIBOR preferred stock.......... 74,556 74,556 74,492
Shareholders' equity:
Series B convertible preferred stock...... 111,333 111,333 111,333
Series C cumulative preferred stock....... 81,892 (81,892)(4) 0 81,892 (81,892)(4)
Common stock.............................. 38,262 38,262 37,121
Additional paid-in capital................ 363,176 363,176 336,990
Other shareholders' equity................ 399,847 (14,773)(5) 385,074 320,089 (14,773)(5)
Total shareholders' equity.......... 994,510 (96,665) 897,845 887,425 (96,665)
Total liabilities and shareholders'
equity........................... $ 2,857,810 (96,665) $ 2,761,145 $2,851,362 (96,665)
Working capital........................... $ 299,609 (96,665) $ 202,944 $ 303,213 (96,665)
Total debt................................ $ 935,708 -- $ 935,708 $1,118,491 --
Book value per share:
Common shareholders' equity............... $ 801,285 $ (14,773) $ 786,512 $ 694,200 $ (14,773)
Common shares outstanding (000)........... 37,849 37,849 36,698
Book value per share...................... $ 21.17 $ (0.39) $ 20.78 $ 18.92 $ (0.40)
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
AT
DECEMBER 31,
1994
<S> <C>
Cash...................................... $ 10,783
Marketable securities..................... 47,320
Accounts receivable....................... 197,473
Inventories............................... 151,097
Other current assets...................... 10,487
Total current assets................ 417,160
Fixed assets, net......................... 1,785,046
Other assets.............................. 497,770
Total tangible assets............... 2,699,976
Intangible assets......................... 54,721
Total assets........................ $2,754,697
Current instalments of long-term debt..... $ 1,604
Accounts payable and accrued
liabilities............................. 209,008
Total current liabilities........... 210,612
Long-term debt, net of current
instalments............................. 1,116,887
Other long-term liabilities............... 561,946
Redeemable LIBOR preferred stock.......... 74,492
Shareholders' equity:
Series B convertible preferred stock...... 111,333
Series C cumulative preferred stock....... 0
Common stock.............................. 37,121
Additional paid-in capital................ 336,990
Other shareholders' equity................ 305,316
Total shareholders' equity.......... 790,760
Total liabilities and shareholders'
equity........................... $2,754,697
Working capital........................... $ 206,548
Total debt................................ $1,118,491
Book value per share:
Common shareholders' equity............... $ 679,427
Common shares outstanding (000)........... 36,698
Book value per share...................... $ 18.52
</TABLE>

(1) The pro forma adjustments assume that the Offer was consummated on June 30,
1995.
(2) The pro forma adjustments assume that the Offer was consummated on December
31, 1994.
(3) Estimated cost of retiring 3,400,000 Depositary Shares at $27.875 per share,
including estimated expenses of $1,890,000.
(4) Elimination of carrying value of 3,400,000 Depositary Shares.
(5) Estimated retained earnings charge for premium paid to preferred
shareholders ($9,775,000), write-off of issuance costs ($3,108,234), and
recognition of estimated expenses of ($1,890,000), assuming 3,400,000
Depositary Shares are tendered at $27.875 per share.
19

<PAGE>
ADDITIONAL INFORMATION. The Company is subject to the informational
requirements of the Exchange Act and therefore files periodic reports, proxy
statements and other information with the Commission. The Company is required to
disclose in such proxy statements certain information, as of particular dates,
concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company. The
Company has also filed a Transaction Statement on Schedule 13E-3 and an Issuer
Tender Offer Statement on Schedule 13E-4 with the Commission which includes
certain additional information relating to the Offer.
Such material (including the 1994 10-K and the 1995 Second Quarter 10-Q)
can be inspected and copied at the public reference facilities of the
Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C., and (except for
the Schedule 13E-3 and Schedule 13E-4) at its regional offices at Seven World
Trade Center, Suite 1300, New York, New York, and 500 West Madison Street, Suite
1400, Chicago, Illinois. Reports, proxy materials and other information about
the Company are also available at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005. Copies may also be obtained by mail from
the Commission's Public Reference Branch, 450 Fifth Street, N.W., Washington,
D.C. 20549.

SECTION 11. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases all outstanding Depositary Shares
pursuant to the Offer, the total amount required by the Company to purchase such
Depositary Shares and pay related fees and expenses will be approximately
$96,665,000. See Section 14. The Company anticipates that it will fund the
purchase of Depositary Shares pursuant to the Offer and the payment of related
fees and expenses from available cash, cash equivalents and marketable
securities of the Company.

SECTION 12. TRANSACTIONS AND ARRANGEMENTS CONCERNING THE DEPOSITARY SHARES
The Depositary Shares were issued by the Company in an underwritten public
offering for cash which was registered under the Securities Act of 1933, as
amended. The offering, which commenced on February 1, 1994, was for 3,400,000
Depositary Shares (including 400,000 Depositary Shares purchased upon exercise
of the over-allotment option) at a price to the public of $25.00 per Depositary
Share, and the Company received aggregate proceeds of $82,322,500 after
deducting the aggregate underwriting discount of $2,677,500 (before deducting
expenses payable by the Company).
Based upon the Company's records and upon information provided to the
Company by its directors and executive officers, during the 60 days prior to the
date of this Offer to Purchase none of the Company and, to the best of the
Company's knowledge, any of the directors or executive officers of the Company
listed on Schedule I to this Offer to Purchase, any person controlling the
Company, any associate of a director or executive officer of the Company, and
any associate of a person controlling the Company has effected any transactions
in the Depositary Shares. As of October 13, 1995, none of the Company, any of
its majority owned subsidiaries, any of its affiliates, any associate of the
Company or its affiliates, and any pension, profit sharing or similar plan of
the Company or its affiliates, and, to the best of the Company's knowledge, none
of any of the directors or executive officers of the Company listed on Schedule
I to this Offer to Purchase, any person controlling the Company, any associate
of a director or executive officer of the Company, and any associate of a person
controlling the Company owns any Depositary Shares.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its directors or executive officers
listed on Schedule I to this Offer to Purchase nor any person controlling the
Company is a party to any contract, arrangement, understanding or relationship
with any other person relating, directly or indirectly, to, or in connection
with, the Offer with respect to any securities of the Company (including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any of such securities, joint ventures,
loan or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies, consents or
authorizations). Except as set forth in this Offer to Purchase, since the
commencement of the Company's second full fiscal year preceding the date of this
Offer to Purchase, no contacts, negotiations, or transactions concerning a
merger, consolidation, or acquisition, a tender offer for or other acquisition
of any securities of the Company, an election of directors, or a sale or
transfer of a material amount of assets, has been entered into or occurred
between any affiliates of the Company or between the Company or any of its
affiliates and any unaffiliated person.

SECTION 13. EXTENSION OF THE TENDER PERIOD; TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its sole discretion, at any
time or from time to time and regardless of whether or not any of the events set
forth in Section 8 shall have occurred or shall be deemed by the Company to have
20

<PAGE>
occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, or payment for, any Depositary Shares
by giving oral or written notice of the extension to the Depositary and making a
public announcement thereof. During any such extension, all Depositary Shares
previously tendered and not purchased or withdrawn will remain subject to the
Offer, except to the extent that such Depositary Shares may be withdrawn as set
forth in Section 6. The Company also expressly reserves the right, in its sole
discretion, to terminate the Offer, not accept for payment and not make payment
for any Depositary Shares not theretofore accepted for payment or paid for upon
the occurrence of any of the conditions specified in Section 8 by giving oral or
written notice of such termination to the Depositary and making a public
announcement thereof. Subject to compliance with applicable law, the Company
further reserves the right, in its sole discretion, and regardless of whether or
not any of the events set forth in Section 8 shall have occurred or shall be
deemed by the Company to have occurred, to amend the Offer in any respect
(including, without limitation, by decreasing or increasing the consideration
offered in the Offer to owners of Depositary Shares or by decreasing the number
of Depositary Shares being sought in the Offer). Amendments to the Offer may be
made at any time or from time to time and shall be effected by public
announcement thereof, such announcement, in the case of an extension, to be
issued no later than 9:00 a.m., Eastern Time, on the next business day after the
previously scheduled Expiration Date. Any public announcement made pursuant to
the Offer will be disseminated promptly to holders of Depositary Shares in a
manner reasonably designed to inform holders of such change. Without limiting
the manner in which the Company may choose to make a public announcement, except
as required by applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules provide that the
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer (other than a
change in price, a change in amount of securities sought, or a change in the
Soliciting Dealers' fee) will depend on the facts and circumstances, including
the relative materiality of such terms or information. The Commission has stated
that, as a general rule, it is of the view that an offer should remain open for
a minimum of five business days from the date that notice of such a material
change is first published, sent or given. If (a) the Company (i) increases or
decreases the price to be paid for Depositary Shares, (ii) decreases the number
of Depositary Shares being sought, or (iii) increases or decreases the
Soliciting Dealers' fee, and (b) the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from
and including the date that notice of such increase or decrease is first
published, sent or given, the Offer will be extended until the expiration of
such period of ten business days.

SECTION 14. FEES AND EXPENSES
The Company has retained The Bank of New York as Depositary, Morrow & Co.,
Inc. as Information Agent and Merrill Lynch & Co. as Dealer Manager in
connection with the Offer. The Information Agent and Dealer Manager will assist
holders who request assistance in connection with the Offer and may request
brokers, dealers and other nominee holders to forward materials relating to the
Offer to beneficial owners. The Company has agreed to pay the Dealer Manager,
upon acceptance for payment of Depositary Shares pursuant to the Offer, a fee of
$0.125 per Depositary Share purchased in the Offer. The Dealer Manager will also
be reimbursed by the Company for its reasonable out-of-pocket expenses,
including attorneys' fees. Merrill Lynch, in the ordinary course of its
business, from time to time acquires Depositary Shares for its trading account.
As a result, on October 13, 1995, Merrill Lynch owned approximately 520,000
Depositary Shares, which it intends to tender pursuant to the Offer. The Dealer
Manager has rendered, is currently rendering and is expected to continue to
render various investment banking and other advisory services to the Company. It
has received, and will continue to receive, customary compensation from the
Company for these services. The Depositary and Information Agent will receive
reasonable and customary compensation for their services in connection with the
Offer and will also be reimbursed for reasonable out-of-pocket expenses,
including attorneys' fees. The Company has agreed to indemnify the Depositary,
Information Agent and Dealer Manager against certain liabilities in connection
with the Offer, including certain liabilities under the Federal securities laws.
Neither the Depositary nor the Information Agent has been retained to make
solicitations, and none of the Depositary, Information Agent or Dealer Manager
has been retained to make recommendations, in their respective roles as
Depositary, Information Agent and Dealer Manager.
The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee of $0.375 per Depositary Share, or for any transaction equal to
or exceeding 20,000 Depositary Shares, $0.25 per Depositary Share, for any
Depositary Shares tendered, accepted for payment and paid for pursuant to the
Offer. For purposes of this Section 14, "Soliciting Dealer" includes (i) any
broker or dealer in securities, including the Dealer Manager in its capacity as
a broker or dealer, who is a
21

<PAGE>
member of any national securities exchange or of the NASD, (ii) any foreign
broker or dealer not eligible for membership in the NASD who agrees to conform
to the NASD's Rules of Fair Practice in soliciting tenders outside the United
States to the same extent as though it were an NASD member, or (iii) any bank or
trust company, any one of whom has solicited and obtained a tender of Depositary
Shares pursuant to the Offer. No such fee shall be payable to a Soliciting
Dealer in respect of Depositary Shares registered in the name of the Soliciting
Dealer unless (i) the Depositary Shares are held by the Soliciting Dealer as
nominee and the Depositary Shares are being tendered for the benefit of one or
more beneficial owners identified on the Letter of Transmittal or on the Notice
of Solicited Tenders (included in the materials provided to brokers and
dealers), or (ii) the Depositary Shares are being tendered for the benefit of
the Soliciting Dealer and the Soliciting Dealer certifies on the Letter of
Transmittal or on the Notice of Solicited Tenders that such Depositary Shares
were acquired by the Soliciting Dealer (x) after the announcement of the Offer,
(y) at a price not in excess of the Purchase Price, and (z) from a holder
solicited by the Soliciting Dealer. For purposes of clause (z), "solicited"
shall mean direct contact (other than the mailing of the tender offer materials)
with the holder relating to the tender of Depositary Shares beneficially owned
by the holder that resulted in the purchase by the Soliciting Dealer of such
Depositary Shares. No fee shall be payable to a Soliciting Dealer with respect
to the tender of Depositary Shares by a holder unless the Letter of Transmittal
accompanying the tender designates such Soliciting Dealer as such in the box
captioned "Solicited Tenders" or the Notice of Solicited Tenders accompanying
the tender designates such Soliciting Dealer. No fee shall be payable to the
Soliciting Dealer with respect to the tender of Depositary Shares by the holder
of record, for the benefit of the beneficial owner, unless the beneficial owner
has designated the Soliciting Dealer. No fee shall be payable to a Soliciting
Dealer unless the Soliciting Dealer returns a Notice of Solicited Tenders to the
Depositary within 3 business days after the Expiration Date. No fee shall be
payable to a Soliciting Dealer if the Soliciting Dealer is required for any
reason to transfer the amount of the fee to a depositing holder (other than
itself).
No broker, dealer, bank, trust company or fiduciary shall be deemed to be
the agent of the Company, the Depositary, the Information Agent or the Dealer
Manager for purposes of the Offer.
The Company will pay (or cause to be paid) any stock transfer taxes on its
purchase of Depositary Shares, except as otherwise provided in Instruction 6 of
the Letter of Transmittal.
Assuming all outstanding Depositary Shares are tendered pursuant to the
Offer, it is estimated that the expenses incurred by the Company in connection
with the Offer will be approximately as set forth below. The Company will be
responsible for paying all such expenses.
<TABLE>
<S> <C>
Dealer Manager fees......................................................... $ 425,000
Solicitation fees and expenses.............................................. $1,275,000
Printing and mailing costs.................................................. $ 16,000
Filing fees................................................................. $ 19,000
Legal, accounting and miscellaneous......................................... $ 155,000
Total....................................................................... $1,890,000
</TABLE>

SECTION 15. MISCELLANEOUS
The Offer is not being made to, nor will the Company accept tenders from,
owners of Depositary Shares in any jurisdiction in which the Offer or its
acceptance would not be in compliance with the laws of such jurisdiction. The
Company is not aware of any jurisdiction where the making of the Offer or the
tender of Depositary Shares would not be in compliance with applicable law. If
the Company becomes aware of any jurisdiction where the making of the Offer or
the tender of Depositary Shares is not in compliance with any applicable law,
the Company will make a good faith effort to comply with the law. If, after a
good faith effort, the Company cannot comply with the law, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Depositary Shares residing in that jurisdiction. In any jurisdiction in which
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on the Company's
behalf by one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
BOWATER INCORPORATED
22
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name, business address and current
principal occupation or employment of the directors and executive officers of
the Company. Unless otherwise indicated, all occupations, offices or positions
of employment listed opposite any individual's name were held by such individual
during the course of the last five years. Unless otherwise indicated, each
individual listed below is a citizen of the United States and maintains his or
her principal business address at the address of the Company, 55 East Camperdown
Way, Greenville, South Carolina 29602.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
ADDRESS FIVE-YEAR EMPLOYMENT HISTORY
<S> <C>
DIRECTORS
FRANCIS J. AGUILAR PROFESSOR, HARVARD UNIVERSITY GRADUATE SCHOOL OF BUSINESS -- Professor Aguilar has been a
Graduate School of faculty member at the Harvard University School of Business since 1967. Dr. Aguilar also has
Business served as Executive Director of the Management Education Alliance, a non-profit educational
Harvard University -- corporation located in Boston, Massachusetts, since May 1994. Dr. Aguilar is a director of
Cumnock #300 Dynamics Research Corporation and Burr-Brown Corporation, and also acts as an independent
Boston, MA 02163 business consultant.
HUGH D. AYCOCK RETIRED PRESIDENT AND CHIEF OPERATING OFFICER OF NUCOR CORPORATION -- Mr. Aycock was President
2675 Trotter Road and Chief Operating Officer of Nucor Corporation, a steel and steel products company located in
Florence, SC 29501 Charlotte, North Carolina, from 1984 to 1991. He previously held various management positions,
including that of General Manager, at Nucor Corporation operating units. Mr. Aycock serves as a
director of Nucor Corporation. Since retiring from Nucor Corporation, Mr. Aycock has been
engaged in managing family investments in various entrepreneurial activities.
RICHARD BARTH CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF CIBA-GEIGY CORPORATION -- Mr. Barth became
662 Guard Hill Road Chairman of Ciba-Geigy Corporation, a diversified chemical products company located in
Bedford, NY 10506 Tarrytown, New York, in July 1990. He has been President and Chief Executive Officer of
Ciba-Geigy Corporation since 1986, Chief Financial Officer from 1979 to 1986 and Secretary and
General Counsel from 1974 to 1986 and from 1970 to 1986, respectively. He is also a director of
The Bank of New York.
KENNETH M. CURTIS MEMBER, CURTIS THAXTER STEVENS BRODER & MICOLEAU, LIMITED LIABILITY COMPANY, P.A. -- Mr. Curtis
Curtis Thaxter Stevens was a partner in the Portland, Maine, law firm of Curtis Thaxter Stevens Broder & Micoleau from
Broder & Micoleau, 1975 to January 1, 1995, when the firm became a limited liability company, of which he
Limited Liability currently is a member. Mr. Curtis also served as President of Maine Maritime Academy from
Company, P.A. October 1986 to September 1994. He was formerly Secretary of State of Maine from 1965 to 1966,
One Canal Plaza Governor of Maine from 1967 to 1975, and U.S. Ambassador to Canada from 1979 to 1981. Mr.
Portland, ME 04112 Curtis is a director of Key Corp.
ANTHONY P. GAMMIE* CHAIRMAN OF THE BOARD OF THE COMPANY -- Mr. Gammie became Chairman of the Board in January
1985. He served as Chief Executive Officer of the Company from January 1983 to March 1, 1995.
He was President of the Company from January 1983 to July 1, 1992. He was President of the
Company's Pulp and Paper Group from August 1981 to December 1982, and Executive Vice President
of the Company from 1979 to 1982. He was a director of Bowater plc, the former parent company
of the Company, until July 1984, and prior to being transferred to the United States at the end
of 1978, he was Chairman and Managing Director of Bowater United Kingdom Limited. He is also a
director of Alumax Inc., The Bank of New York, and Sovran Self Storage, Inc.
H. GORDON MACNEILL** CHAIRMAN OF JANNOCK LIMITED -- Mr. MacNeill has been Chairman of Jannock Limited, a building
Jannock Limited products company located in Toronto, Ontario, since 1990, prior to which he had served as
Suite 5205, Scotia Plaza President and Chief Executive Officer since 1976. Mr. MacNeill is also Chairman of the Board of
P. O. Box 1012 IPL Energy Inc. (formerly Interprovincial Pipe Lines System, Inc.) and Wajax Limited and a
40 King St. W. director of Home Oil Company Limited.
Toronto, Ontario M5H 3Y2
Canada
DONALD R. MELVILLE RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF NORTON COMPANY -- Mr. Melville was Chief
4 Paul Revere Road Executive Officer of Norton Company, a diversified manufacturing company located in Worcester,
Worcester, MA 01609 Massachusetts, from 1980 until his retirement at the end of 1987. He was Chairman from 1985 to
1987, President from 1979 to 1986 and Executive Vice President from 1971 to 1979. He is a
director of The Perkin-Elmer Corporation and Acme-Cleveland Corporation.
</TABLE>
I-1

<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
ADDRESS FIVE-YEAR EMPLOYMENT HISTORY
<S> <C>
ARNOLD M. NEMIROW PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY -- Mr. Nemirow became Chief Executive
Officer of the Company on March 1, 1995. He has served as President of the Company since
September 1994 and served as Chief Operating Officer of the Company from September 1994 through
February 1995. Mr. Nemirow served as President and Chief Executive Officer and a director of
Wausau Paper Mills Company, a pulp and paper company located in Wausau, Wisconsin, from July
1990 through July 1994, as Chairman, President and Chief Executive Officer and a director of
Nekoosa Papers, Inc., the business papers division of Great Northern Nekoosa Corporation, from
1988 to March 1990, and as Vice President of Great Northern Nekoosa Corporation from 1984 to
March 1990. Mr. Nemirow is also a director of WPL Holdings, Inc.
JOHN A. ROLLS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF DEUTSCHE BANK NORTH AMERICA -- Mr. Rolls has served as
Deutsche Bank North President and Chief Executive Officer of Deutsche Bank North America, an international banking
America company located in New York, New York, since 1992. Mr. Rolls was Executive Vice President and
31 W. 52nd St., Chief Financial Officer of United Technologies Corporation, an aerospace and climate control
28th Floor systems company located in Hartford, Connecticut, from July 1986 to 1992. Prior to that he was
New York, NY 10019 Senior Vice President and Chief Financial Officer with RCA Corporation.
OFFICERS
ANTHONY P. GAMMIE* CHAIRMAN OF THE BOARD OF THE COMPANY. See "Directors" above.
ARNOLD M. NEMIROW PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY. See "Directors" above.
DONALD J. D'ANTUONO VICE PRESIDENT -- CORPORATE DEVELOPMENT OF THE COMPANY since September 1991. Previously he had
been Vice President -- Investor Relations since April 1984. He was Controller from 1977 to
1978, Treasurer of the Company's subsidiary, Bowater Mersey Paper Company Limited ("Mersey")
located in Liverpool, Nova Scotia, from 1978 to 1979 and Vice President -- Controller of the
Company from 1979 to 1984.
E. PATRICK DUFFY SENIOR VICE PRESIDENT OF THE COMPANY AND PRESIDENT OF THE COATED PAPER AND PULP DIVISION OF THE
P. O. Box 7 COMPANY since April 1, 1995. Previously he was President of the telecommunications business
Catawba, SC 29704 unit of Meredith Burda, a printing company located in Des Moines, Iowa, from 1993 to 1995 and
President of its catalog group from 1990 to 1992. Meredith Burda was acquired by R.R. Donnelley
and Sons, a printing company located in Chicago, Illinois, in 1990.
RICHARD F. FRISCH VICE PRESIDENT -- HUMAN RESOURCES OF THE COMPANY since May 1995. Previously he was Director of
Compensation and Benefits from June 1994 to May 1995. Prior to that time, Mr. Frisch was
employed by Scott Paper Company, a pulp and paper company, at its Philadelphia, Pennsylvania,
headquarters, most recently as Director of Benefits from 1991 to 1994, as Manager of Group
Insurance and Thrift Plans from 1990 to 1991, as Manager of Group Insurance from 1989 to 1990
and as Manager of Group Insurance and Administration from 1987 to 1989.
ARTHUR D. FULLER SENIOR VICE PRESIDENT AND PRESIDENT OF THE NEWSPRINT DIVISION OF THE COMPANY since January
1995. Previously he was Vice President Finance, Planning & Administration of MacMillan Bloedel
Packaging Inc., the containerboard and packaging business of MacMillan Bloedel Ltd, located in
Montgomery, Alabama. From 1991 to 1993 he was a partner of Nukraft, located in Dothan, Alabama,
which sought to develop a recycled linerboard mill, and from 1987 to 1990 he was Vice President
and General Manager of Great Southern Paper Company, the containerboard division of Great
Northern Nekoosa Corporation. Earlier he held various management positions with Great Southern
Paper Company.
ROBERT D. LEAHY VICE PRESIDENT -- CORPORATE RELATIONS OF THE COMPANY since March 1993. Previously he served as
Director of Media Communications at International Paper Company, a paper and forest products
company located in Purchase, New York, from November 1989 to March 1993. He was Vice President
of Corporate Communications for Andal Corporation, a metal products company, from 1987 to 1989.
Previously he held various senior level communications/public affairs positions in both
corporate and agency settings.
DAVID G. MAFFUCCI VICE PRESIDENT -- TREASURER OF THE COMPANY since July 1, 1993. He served as Treasurer of the
Company from July 1992 to July 1993. Prior to that he was Director of Financial Planning and
Accounting Operations since 1987 and served as Assistant Controller since 1984.
</TABLE>
I-2

<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
ADDRESS FIVE-YEAR EMPLOYMENT HISTORY
<S> <C>
ECTON R. MANNING VICE PRESIDENT OF THE COMPANY since March 1988 and General Counsel of the Company since
September 1988. Previously he was Vice President, General Counsel and Secretary of U.S. Plywood
Corporation from 1985 to 1987, and was Vice President and General Counsel of Continental Forest
Industries, Inc., where he was employed from 1973 to 1984.
DONALD G. MCNEIL** SENIOR VICE PRESIDENT AND PRESIDENT OF THE GREAT NORTHERN PAPER DIVISION OF THE COMPANY. Mr.
One Kathadin Avenue McNeil became Senior Vice President on March 1, 1995, and has been President of the Great
Millinocket, ME 04462 Northern Paper division of the Company located in Millinocket, Maine, since November 1994.
Previously he was President and General Manager of Mersey from February 1992 to November 1994.
He was General Manager of Mersey from December 1991 through January 1992 and Assistant General
Manager from January 1990 to December 1991. From 1977 through 1989 he held various engineering
and management positions with Mersey.
ROBERT A. MORAN VICE PRESIDENT -- PULP & PAPER MANUFACTURING SERVICES OF THE COMPANY since July 1, 1992. Prior
to that he was Vice President -- Manufacturing Services for the Pulp and Paper Group located in
Greenville, South Carolina since 1991, Director of Planning and Development for the Pulp and
Paper Group from August 1988 to November 1991 and also served as Assistant General Manager of
the Carolina Mill from April 1988 to August 1988.
MICHAEL F. NOCITO VICE PRESIDENT -- CONTROLLER OF THE COMPANY since July 1, 1993. He served as Controller of the
Company's Southern Division located in Calhoun, Tennessee, from October 1992 to July 1993.
Prior to this he served as Assistant Controller of the Southern Division since 1988. Mr. Nocito
joined the Company in 1978.
ROBERT J. PASCAL SENIOR VICE PRESIDENT AND PRESIDENT OF THE COMMUNICATION PAPERS DIVISION OF THE COMPANY since
1120 Post Road, February 1994. Previously he was Vice President of the Company since December 1986 and
Third Floor President of the Communication Papers Division located in Darien, Connecticut, since December
P. O. Box 4012 1990, prior to which he was General Manager of that unit. He was Group Vice President of Pitney
Darien, CT 06820 Bowes, Inc. from 1981 to 1986.
AUBREY S. ROGERS VICE PRESIDENT -- INFORMATION SERVICES OF THE COMPANY since July 1, 1992. Prior to that he was
Vice President -- Information Services of the Pulp and Paper Group located in Greenville, South
Carolina, since 1990 and Assistant Controller -- Director of Planning and Information Services
since 1989. He also served in various financial positions of the Company for more than twenty
years.
WENDY C. SHIBA SECRETARY OF THE COMPANY since July 1993, and Assistant General Counsel of the Company since
June 1993. From January 1992 to June 1993, she was Corporate Chair of the City of Philadelphia,
Pennsylvania, Law Department, where she managed the Corporate Group and was Associate Professor
of Law from 1990 to 1993 and Assistant Professor of Law from 1985 to 1990 at Temple University
School of Law located in Philadelphia, Pennsylvania, where she taught subjects relating to
corporate law and served as a consultant in legal writing and corporate law. Earlier she
practiced corporate law in the private sector.
</TABLE>

* Denotes a citizen of the United Kingdom.
** Denotes a citizen of Canada.
I-3

<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, depositary receipts for
Depositary Shares and any other required documents should be sent or delivered
by each holder of Depositary Shares or such holder's broker, dealer, commercial
bank or trust company to the Depositary at one of its addresses set forth below.
<TABLE>
<S> <C> <C>
THE DEPOSITARY FOR
THE OFFER IS:
THE BANK OF NEW YORK

BY MAIL: BY FACSIMILE BY HAND OR OVERNIGHT COURIER:
Tender & Exchange TRANSMISSION Tender & Exchange Department
Department (FOR ELIGIBLE 101 Barclay Street
P.O. Box 11248 INSTITUTIONS ONLY) Receive and Deliver Window
Church Street Station (212) 815-6213 New York, New York 10286
New York, NY 10286-1248
CONFIRM BY TELEPHONE:
(800) 507-9357
</TABLE>

Any questions or requests for assistance or for additional copies of this Offer
to Purchase or the Letter of Transmittal may be directed to the Information
Agent or Dealer Manager. Holders of Depositary Shares may also contact their
brokers, dealers, commercial banks, trust companies or other nominees for
assistance concerning the Offer.

THE INFORMATION AGENT FOR THE OFFER IS:
MORROW & CO., INC.
909 Third Avenue -- 20th Floor
New York, New York 10022
(800) 662-5200
or
(212) 754-8000
(Call Collect)

THE DEALER MANAGER FOR THE OFFER IS:
MERRILL LYNCH & CO.
250 Vesey Street
World Financial Center -- North Tower
New York, New York 10281
Telephone: (212) 236-4565 (Call Collect)

LETTER OF TRANSMITTAL
TO TENDER DEPOSITARY SHARES
EACH REPRESENTING
A ONE-FOURTH INTEREST IN A SHARE OF
8.40% SERIES C CUMULATIVE PREFERRED STOCK,
PAR VALUE $1.00 PER SHARE
OF
BOWATER INCORPORATED
PURSUANT TO ITS OFFER TO PURCHASE
DATED OCTOBER 16, 1995
THE TENDER OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
EASTERN TIME, ON NOVEMBER 15, 1995, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY FACSIMILE TRANSMISSION
BY MAIL: (FOR ELIGIBLE INSTITUTIONS ONLY): BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 CONFIRM BY TELEPHONE: 101 Barclay Street
Church Street Station (800) 507-9357 Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Offer to Purchase (as defined below).
This Letter of Transmittal can be used only if (a) depositary receipts for
Depositary Shares (as defined below) are to be delivered with it or (b)
Depositary Shares are being delivered concurrently by book-entry transfer to the
account maintained by the Depositary at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
(collectively, the "Depository Institutions") as set forth in Section 5 of the
Offer to Purchase (as defined below).
Holders of Depositary Shares who cannot deliver the depositary receipts for
their Depositary Shares to the Depositary on or prior to the Expiration Date (as
defined in the Offer to Purchase) or who cannot complete the procedure for
book-entry transfer on a timely basis or who cannot deliver a Letter of
Transmittal and all other required documents to the Depositary on or prior to
the Expiration Date, in any case, must tender their Depositary Shares pursuant
to the guaranteed delivery procedure set forth in Section 5 of the Offer to
Purchase. See Instruction 2.
The name(s) and address(es) of the registered holder(s) should be printed
below, if they are not already printed below, exactly as they appear on the
depositary receipt(s) representing the Depositary Shares tendered herewith. The
depositary receipt(s) and the number of Depositary Shares that the registered
holder(s) wish(es) to tender should be indicated in the appropriate boxes below.

<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF DEPOSITARY SHARES TENDERED
IF BLANK, PLEASE PRINT NAME AND DEPOSITARY SHARES TENDERED
ADDRESS OF REGISTERED HOLDER. (ATTACH ADDITIONAL LIST IF NECESSARY)
NUMBER OF DEPOSITARY
DEPOSITARY RECEIPT SHARES REPRESENTED BY NUMBER OF
NUMBER(S)* DEPOSITARY RECEIPT* DEPOSITARY SHARES**
TOTAL AMOUNT
TENDERED:
</TABLE>

* Need not be completed by holders delivering Depositary Shares by book-entry
transfer.
** All Depositary Shares represented by any depositary receipts delivered to
the Depositary shall be deemed tendered unless otherwise indicated in this
Column. See Instruction 4.

(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
( ) CHECK HERE IF TENDERED DEPOSITARY SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE DEPOSITORY
INSTITUTIONS AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Check Box of Depository Institution:
( ) The Depository Trust Company
( ) Midwest Securities Trust Company
( ) Philadelphia Depository Trust Company
Transaction Code Number
( ) CHECK HERE IF TENDERED DEPOSITARY SHARES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution that Guaranteed Delivery
If Delivery is by Book-Entry Transfer:
Name of Tendering Institution
DTC Account Number
Transaction Code Number
Check Box of Depository Institution:
( ) The Depository Trust Company
( ) Midwest Securities Trust Company
( ) Philadelphia Depository Trust Company

LADIES AND GENTLEMEN:
The undersigned hereby tenders to Bowater Incorporated, a Delaware
corporation (the "Company"), the above-described Depositary Shares (the
"Depositary Shares"), each representing a one-fourth interest in a share of its
8.40% Series

<PAGE>
C Cumulative Preferred Stock, par value $1.00 per share, liquidation preference
$100 per share, pursuant to the Company's offer to purchase any and all
Depositary Shares at a price of $27.875 per Depositary Share (the "Purchase
Price"), net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated October 16, 1995 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, together with the Offer to Purchase, constitutes the
"Offer").
Subject to and effective upon acceptance for payment of the Depositary
Shares tendered herewith in accordance with the terms of the Offer (including,
if the Offer is extended or amended, the terms or conditions of any such
extension or amendment), the undersigned hereby sells, assigns and transfers to
or upon the order of the Company all right, title and interest in and to all the
Depositary Shares that are being tendered hereby, or orders the registration of
such Depositary Shares delivered by book-entry transfer, that are purchased
pursuant to the Offer and hereby irrevocably constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Depositary Shares, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to:
(a) deliver depositary receipts for such Depositary Shares, or
transfer ownership of such Depositary Shares on the account books
maintained by any of the Depository Institutions, together, in any case,
with all accompanying evidences of transfer and authenticity, to or upon
the order of the Company, upon receipt by the Depositary, as the
undersigned's agent, of the Purchase Price with respect to such Depositary
Shares;
(b) present depositary receipts for such Depositary Shares for
cancellation and transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Depositary Shares, all in accordance with the
terms of the Offer.
The undersigned hereby represents and warrants that:
(a) the undersigned has full power and authority to tender, sell,
assign and transfer the Depositary Shares tendered hereby;
(b) when and to the extent the Company accepts the Depositary Shares
for purchase, the Company will acquire good, marketable and unencumbered
title to the Depositary Shares, free and clear of all security interests,
liens, charges, encumbrances, conditional sales agreements or other
obligations relating to their sale or transfer, and not subject to any
adverse claim;

<PAGE>
(c) on request, the undersigned will execute and deliver any
additional documents the Depositary or the Company deems necessary or
desirable to complete the assignment, transfer and purchase of the
Depositary Shares tendered hereby; and
(d) the undersigned has read and agrees to all the terms of the Offer.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may not
be required to accept for payment any of the Depositary Shares tendered
herewith.
The undersigned understands that tenders of Depositary Shares pursuant to
any one of the procedures described in Section 5 of the Offer to Purchase and in
the instructions hereto will constitute an agreement between the undersigned and
the Company upon the terms and subject to the conditions of the Offer.
All authority herein conferred, or agreed to be conferred, shall survive
the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in Section 6 of the
Offer to Purchase, this tender is irrevocable.
Unless otherwise indicated under "Special Payment Instructions", please
issue the check for the Purchase Price and/or return or issue the depositary
receipt(s) evidencing any Depositary Shares not tendered, not accepted for
payment or for which payment is not made, in the name(s) of the registered
holder(s) appearing under "Description of Depositary Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions",
please mail the check for the Purchase Price and/or the depositary receipt(s)
evidencing any Depositary Shares not tendered, not accepted for payment or for
which payment is not made (and accompanying documents, as appropriate), to the
address of the registered holder(s) appearing under "Description of Depositary
Shares Tendered". In the event that both the "Special Delivery Instructions" and
"Special Payment Instructions" are completed, please issue the check for the
Purchase Price and/or issue or return the depositary receipt(s) evidencing any
Depositary Shares not tendered, not accepted for payment or for which payment is
not made, in the name(s) of, and deliver said check and/or depositary receipt(s)
to, the person or persons so named. The undersigned recognizes that the Company
has no obligation pursuant to the "Special Payment Instructions" to transfer any
Depositary Shares from the name(s) of the registered holder(s) thereof if the
Company does not accept for payment or make payment for any of the Depositary
Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 7, 10 AND 11)
To be completed ONLY if the check for the aggregate Purchase Price of
Depositary Shares purchased and/or depositary receipts for Depositary Shares
not tendered or not purchased are to be issued in the name of someone other
than the undersigned.
Issue check and/or depositary receipt(s) to:
Name
(PLEASE PRINT)
Address

(INCLUDE ZIP CODE)

(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if depositary receipt(s) for Depositary Shares not
tendered or not purchased and/or the check for the purchase price of
Depositary Shares purchased are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown
above.
Mail check and/or depositary receipt(s) to:
Name
(PLEASE PRINT)
Address

(INCLUDE ZIP CODE)

(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)

HOLDER(S) SIGN HERE
(See Instructions 2, 5 and 6)
(Please Complete Substitute Form W-9 Below)
(Note: Signature(s) must be guaranteed if required by Instruction 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
depositary receipts or on a security position listing or by person(s)
authorized to become registered holder(s) by depositary receipts and documents
transmitted with this Letter of Transmittal. If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.

<PAGE>

(SIGNATURE(S) OF HOLDER(S))
Date , 1995
Name(s)
(PLEASE PRINT)
Area Code(s) and Telephone Number(s)
(Tax Identification or Social Security Number(s))
Guarantee of Signature(s)
(See Instructions 2 and 5)
Authorized Signature
Name
(PLEASE PRINT)
Date , 1995
Capacity or Title
Name of Firm
Address
(INCLUDE ZIP CODE)
Area Code and Telephone Number
SOLICITED TENDERS
(SEE INSTRUCTION 9)
The Company will pay to any Soliciting Dealer, as defined in Instruction
9, a solicitation fee of $0.375 per Depositary Share, or for any transaction
equal to or exceeding 20,000 Depositary Shares, $0.25 per Depositary Share,
for any Depositary Shares tendered, accepted for payment and paid for pursuant
to the Offer.
The undersigned represents that the Soliciting Dealer that solicited and
obtained this tender is:
Name of Firm:
(Please Print)
Name of Individual Broker or Financial Consultant:
Identification Number (if known):
Address:

(Include Zip Code)
The following to be completed ONLY if customer's Depositary Shares held
in nominee name are tendered.
<TABLE>
<CAPTION>
<S> <C>
NUMBER OF DEPOSITARY
BENEFICIAL OWNERS SHARES TENDERED
(Attach additional list if necessary)
Beneficial Owner No. 1..........................................................................
<PAGE>
Beneficial Owner No. 2..........................................................................
Beneficial Owner No. 3..........................................................................
</TABLE>

The acceptance of compensation by any Soliciting Dealer will constitute a
representation by it that: (i) it has complied with the applicable
requirements of the Securities Exchange Act of 1934, as amended, and the
applicable rules and regulations thereunder, in connection with such
solicitations; (ii) it is entitled to such compensation for such solicitation
under the terms and conditions of the Offer to Purchase; (iii) in soliciting
tenders of Depositary Shares, it has used no soliciting materials other than
those furnished by the Company; and (iv) if it is a foreign broker or dealer
not eligible for membership in the National Association of Securities Dealers,
Inc. (the "NASD"), it has agreed to conform to the NASD's Rules of Fair
Practice in making solicitations.
The payment of compensation to any Soliciting Dealer is dependent on the
Soliciting Dealer's returning a Notice of Solicited Tenders to the Depositary.
SOLICITING DEALERS SEEKING PAYMENT OF A FEE FOR DEPOSITARY SHARES
BENEFICIALLY OWNED BY SUCH SOLICITING DEALER MUST COMPLETE THE CERTIFICATION
BELOW.
CERTIFICATION BY TENDERING SOLICITING DEALERS
(See Instruction 9)
The undersigned Soliciting Dealer hereby certifies that the Depositary
Shares tendered hereby were acquired by the Soliciting Dealer (x) after the
announcement of the Offer, (y) at a price not in excess of the Purchase Price
(as defined in the Offer to Purchase), and (z) from a holder solicited by the
Soliciting Dealer. For purposes of clause (z), "solicited" shall mean direct
contact (other than the mailing of the tender offer materials) with the holder
relating to the tender of Depositary Shares beneficially owned by the holder
that resulted in the purchase by the Soliciting Dealer of the Depositary
Shares.

Name of Soliciting Dealer
By
Name
Title:

<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm that is an
"Eligible Institution" (as defined in the Offer to Purchase). Signatures on this
Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal
is signed by the registered owner of the Depositary Shares (which term, for
purposes of this document, shall include any participant in one of the
Depository Institutions whose name appears on a security position listing as the
owner of Depositary Shares) tendered herewith and such holder(s) have not
completed either of the boxes entitled "Special Payment Instructions" or
"Special Delivery Instructions" on this Letter of Transmittal or (b) such
Depositary Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF THE LETTER OF TRANSMITTAL AND DEPOSITARY SHARES. This Letter
of Transmittal is to be used only if (a) depositary receipts for Depositary
Shares are to be forwarded herewith or (b) delivery of Depositary Shares is to
be made by book-entry transfer pursuant to the procedures set forth in Section 5
of the Offer to Purchase. Depositary receipts for all physically delivered
Depositary Shares or a confirmation of a book-entry transfer of all Depositary
Shares delivered electronically into the Depositary's account at one of the
Depository Institutions, together in each case with a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the front page of this Letter of Transmittal on or prior to the
Expiration Date (as defined in the Offer to Purchase). Delivery of documents to
one of the Depository Institutions does not constitute delivery to the
Depositary.
Holders of Depositary Shares who cannot deliver the depositary receipts for
the Depositary Shares to the Depositary on or prior to the Expiration Date or
who cannot complete the procedure for book-entry transfer on a timely basis or
who cannot deliver a Letter of Transmittal and all other required documents to
the Depositary on or prior to the Expiration Date, in any case, must tender
their Depositary Shares pursuant to the guaranteed delivery procedure set forth
in Section 5 of the Offer to Purchase. Pursuant to such procedure: (a) the
tender must be made by or through an Eligible Institution, (b) a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form provided by the Company must be received (by hand, mail or facsimile
transmission) by the Depositary on or prior to the Expiration Date, and (c) the
depositary receipts for all tendered Depositary Shares, in proper form for
transfer (or a confirmation of a book-entry transfer of such Depositary Shares
into the Depositary's account at one of the Depository Institutions), together
with a properly completed and duly executed Letter of Transmittal and any
required signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in Section 5 of the Offer to Purchase.
THE METHOD OF DELIVERY OF DEPOSITARY SHARES, THIS LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER
OF DEPOSITARY SHARES. IF DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
No alternative, conditional, or contingent tenders will be accepted, and no
fractional Depositary Shares will be purchased. By executing this Letter of
Transmittal (or facsimile thereof), each tendering holder of Depositary Shares
waives any right to receive any notice of the acceptance of such holder's
tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Depositary Shares Tendered" is inadequate, the depositary
receipt number(s) and/or the number of Depositary Shares and any other required
information should be listed on a separate signed schedule and attached to this
Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED DEPOSITARY SHARES. Partial tenders are
not applicable to holders who deliver Depositary Shares by book-entry transfer.
If fewer than all the Depositary Shares represented by any depositary receipt
delivered to the Depositary are to be tendered, fill in the number of Depositary
Shares that are to be tendered in the box entitled "Number of Depositary Shares
Tendered." If such Depositary Shares are purchased, a new depositary receipt for
the remainder of the Depositary Shares represented by the old depositary receipt
will be sent to and in the name of the registered holder(s) (unless otherwise
provided by such holder(s) having completed either of the boxes entitled
"Special Payment Instructions" or "Special Delivery Instructions" on this Letter
of Transmittal) promptly following the expiration of the Offer. All Depositary
Shares represented by the depositary receipt(s) listed and delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Depositary Shares tendered herewith, the signature(s) must correspond with
name(s) as written on the face of the depositary receipt without any change
whatsoever.

<PAGE>
If any of the Depositary Shares tendered herewith are registered in the
names of two or more joint owners, each such owner must sign this Letter of
Transmittal.
If any of the Depositary Shares tendered herewith are registered in
different names on different depositary receipts, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal as there are
different registrations of depositary receipts.
If this Letter of Transmittal is signed by the registered holder(s) of the
Depositary Shares tendered herewith, no endorsements of depositary receipts or
separate stock powers are required unless payment is to be made, and/or the
depositary receipts for Depositary Shares not tendered or not purchased are to
be issued, in the name(s) of any person(s) other than the registered holder(s).
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of the Depositary Shares tendered herewith, however, the depositary
receipts must be endorsed or accompanied by appropriate stock powers, in either
case, signed exactly as the name(s) of the registered holder(s) appear(s) on the
depositary receipts for such Depositary Shares. Signature(s) on any such
depositary receipts or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
If this Letter of Transmittal or any depositary receipt or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such proper evidence satisfactory to the Company of the authority of
such person so to act must be submitted.
6. STOCK TRANSFER TAXES. The Company will pay any stock transfer taxes with
respect to the transfer and sale of Depositary Shares to it or its order
pursuant to the Offer. If, however, payment of the Purchase Price is to be made
to, or if depositary receipts for Depositary Shares not tendered or accepted for
purchase are to be registered in the name of any person other than the
registered holder, or if tendered depositary receipts are registered in the name
of any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered holder or
such person) payable on account of the transfer to such person will be deducted
from the Purchase Price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the Purchase
Price of any Depositary Shares purchased is to be issued to, or any Depositary
Shares not tendered or not purchased are to be returned in the name of, a person
other than the person(s) signing this Letter of Transmittal or if the check or
any depositary receipts for Depositary Shares not tendered or not purchased are
to be mailed to someone other than the person(s) signing this Letter of
Transmittal or to the person(s) signing this Letter of Transmittal at an address
other than that shown in the box entitled "Description of Depositary Shares
Tendered," the boxes entitled "Special Payment Instructions" and/or "Special
Delivery Instructions" on this Letter of Transmittal should be completed.
8. LOST, STOLEN OR DESTROYED DEPOSITARY RECEIPTS. Any holder of Depositary
Shares whose depositary receipts have been lost, stolen or destroyed should
contact either the Depositary or the Information Agent at their respective
addresses shown on this Letter of Transmittal for special instructions.
9. SOLICITED TENDERS. The Company will pay to a Soliciting Dealer (as
defined herein) a solicitation fee of $0.375 per Depositary Share, or for any
transaction equal to or exceeding 20,000 Depositary Shares, $0.25 per Depositary
Share, for any Depositary Shares tendered, accepted for payment and paid for
pursuant to the Offer. For purposes of this Instruction 9, "Soliciting Dealer"
includes (i) any broker or dealer in securities, including the Dealer Manager in
its capacity as a broker or dealer, who is a member of any national securities
exchange or of the National Association of Securities Dealers, Inc. (the
"NASD"), (ii) any foreign broker or dealer not eligible for membership in the
NASD who agrees to conform to the NASD's Rules of Fair Practice in soliciting
tenders outside the United States to the same extent as though it were an NASD
member, or (iii) any bank or trust company, any one of whom has solicited and
obtained a tender pursuant to the Offer. No such fee shall be payable to a
Soliciting Dealer in respect of Depositary Shares registered in the name of the
Soliciting Dealer unless (i) the Depositary Shares are held by the Soliciting
Dealer as nominee and the Depositary Shares are being tendered for the benefit
of one or more beneficial owners identified on the Letter of Transmittal or on
the Notice of Solicited Tenders (included in the materials provided to brokers
and dealers) or (ii) the Depositary Shares are being tendered for the benefit of
the Soliciting Dealer and the Soliciting Dealer certifies on the Letter of
Transmittal or on the Notice of Solicited Tenders that such Depositary Shares
were acquired by the Soliciting Dealer (x) after the announcement of the Offer,
(y) at a price not in excess of the Purchase Price, and (z) from a holder
solicited by the Soliciting Dealer. For purposes of clause (z), "solicited"
shall mean direct contact (other than the mailing of the tender offer materials)
with the holder relating to the tender of Depositary Shares beneficially owned
by the holder that resulted in the purchase by the Soliciting Dealer of such
Depositary Shares. No fee shall be payable to a Soliciting Dealer with respect
to the tender of Depositary Shares by a holder unless the Letter of Transmittal
accompanying the tender designates such Soliciting Dealer as such in the box
captioned "Solicited Tenders" or the Notice of Solicited Tenders accompanying
the tender designates such Soliciting Dealer. No fee shall be

<PAGE>
payable to a Soliciting Dealer with respect to the tender of Depositary Shares
by the holder of record, for the benefit of the beneficial owner, unless the
beneficial owner has designated the Soliciting Dealer. No fee shall be payable
to a Soliciting Dealer unless the Soliciting Dealer returns a Notice of
Solicited Tenders to the Depositary within 3 business days after the Expiration
Date. No fee shall be payable to a Soliciting Dealer if the Soliciting Dealer is
required for any reason to transfer the amount of the fee to a depositing holder
(other than itself). No broker, dealer, bank, trust company or fiduciary shall
be deemed to be the agent of the Company, the Depositary, the Information Agent
or the Dealer Manager for purposes of the Offer.
10. FEDERAL INCOME TAX WITHHOLDING. Except as provided below under
"Important Tax Information," each tendering holder of Depositary Shares is
required to provide the Depositary with a correct Taxpayer Identification Number
("TIN") on Substitute Form W-9 which is provided under "Important Tax
Information" below. Failure to provide the information on the form may subject
the tendering holder of Depositary Shares to a penalty and 31% Federal backup
withholding tax may be imposed on the payments made to the holder or other payee
with respect to Depositary Shares purchased pursuant to the Offer. For further
information concerning backup withholding and instructions for completing the
Substitute Form W-9, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9."
11. WITHHOLDING ON FOREIGN HOLDERS OF DEPOSITARY SHARES. The Depositary
will withhold Federal income tax equal to 30% of the gross payments payable to a
foreign holder of Depositary Shares unless the Depositary determines that a
reduced rate of withholding or an exemption from withholding is applicable. For
this purpose, a foreign holder of Depositary Shares is any holder that is not
(i) a citizen or resident of the United States, (ii) a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, or (iii) any estate or trust the income of
which is subject to United States Federal income taxation regardless of the
source of such income. The Depositary will determine a holder's status as a
foreign holder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to the holder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign holder of Depositary Shares who has not
previously submitted the appropriate certificates or statements with respect to
a reduced rate of, or exemption from, withholding for which such holder may be
eligible should consider doing so in order to avoid over-withholding. A foreign
holder of Depositary Shares may be eligible to obtain a refund of tax withheld
if such holder meets one of the two tests for capital gain or loss treatment
described in Section 2 of the Offer to Purchase or is otherwise able to
establish that no tax or a reduced amount of tax was due.

<PAGE>
12. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of
Depositary Shares will be determined by the Company, in its sole discretion,
which determination shall be final and binding on all parties. The Company
reserves the absolute right, in its sole discretion, to reject any or all
tenders it determines not to be in proper form or the acceptance for payment of
which may, in the view of the Company or its counsel, be unlawful. The Company
also reserves the absolute right, in its sole discretion, to waive any of the
conditions of the Offer and any irregularity in the tender of any particular
Depositary Shares. No tender of Depositary Shares will be deemed to be properly
made until all irregularities have been cured or waived. Unless waived, any
irregularities in connection with tenders must be cured within such time as the
Company shall determine. None of the Company, the Depositary, the Information
Agent, the Dealer Manager, or any other person is or will be obligated to give
notice of any irregularity in tenders, and none of them will incur any liability
for failure to give any such notice.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or additional copies of the Offer to Purchase and this Letter of Transmittal may
be obtained from the Information Agent or Dealer Manager at their respective
addresses or telephone numbers set forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH DEPOSITARY RECEIPTS FOR DEPOSITARY SHARES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER OF DEPOSITARY SHARES AND ALL OTHER REQUIRED DOCUMENTS) OR A
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO
THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Depositary Shares whose
tendered Depositary Shares are accepted for payment is required to provide the
Depositary with such holder's correct TIN on Substitute Form W-9 below. If the
Depositary is not provided with the correct TIN, the Internal Revenue Service
may subject the holder or other payee to a penalty. In addition, payments that
are made to such holder or other payee with respect to Depositary Shares
purchased pursuant to the Offer may be subject to 31% backup withholding.
Certain holders of Depositary Shares (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements and should indicate their status by
writing "exempt" across the face of the Substitute Form W-9. In order for a
foreign holder to qualify as an exempt recipient, the holder must submit a Form
W-8, signed under penalties of perjury, attesting to that individual's exempt
status. A Form W-8 can be obtained from the Depositary. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the holder of Depositary Shares or other payee.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder of Depositary Shares has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part 2
is checked, the shareholder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below Part 2 in order to avoid backup
withholding. Notwithstanding that the box in Part 2 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed the
Depositary will withhold 31% on all payments made prior to the time a properly
certified TIN is provided to the Depositary.
WHAT NUMBER TO GIVE THE DEPOSITARY
The holder of Depositary Shares is required to give the Depositary the TIN
(e.g., social security number or employer identification number) of the record
owner of the Depositary Shares or of the last transferee appearing on the
transfers attached to, or endorsed on, the depositary receipts evidencing the
Depositary Shares. If the depositary receipts are not registered in the name of
the actual owner or are registered in the name of more than one person, consult
the enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
TO BE COMPLETED BY ALL
TENDERING HOLDERS OF DEPOSITARY SHARES

<PAGE>
(SEE INSTRUCTION 9)
PAYER'S NAME: BOWATER INCORPORATED
<TABLE>
<S> <C> <C>
TIN
Social Security
Number or
Employer
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND Identification
CERTIFY BY SIGNING AND DATING BELOW. Number
SUBSTITUTE
Part 2
FORM W-9 Awaiting TIN
Department of the Treasury
Internal Revenue Service
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the number
shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me), (2) I am not subject to backup
withholding either because (i) I am exempt from backup withholding, (ii) I
have not been notified by the Internal Revenue Service ("IRS") that I am
PAYER'S REQUEST FOR subject to backup withholding as a result of a failure to report all interest
TAXPAYER or dividends, or (iii) the IRS has notified me that I am no longer subject to
IDENTIFICATION backup withholding, and (3) any other information provided on this form is
NUMBER (TIN) true and correct.
AND CERTIFICATION SIGNATURE DATE
You must cross out item (iii) in Part (2) above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
</TABLE>

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments made to me on account of the Depositary
Shares shall be retained until I provide a taxpayer identification number to
the Depositary and that, if I do not provide my taxpayer identification number
within 60 days, such retained amounts shall be remitted to the Internal
Revenue Service as backup withholding and 31% of all reportable payments made
to me thereafter will be withheld and remitted to the Internal Revenue Service
until I provide a taxpayer identification number.
Signature Date
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY FACSIMILE
BY MAIL: TRANSMISSION BY HAND OR OVERNIGHT COURIER:
(FOR ELIGIBLE
Tender & Exchange Department INSTITUTIONS ONLY): Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station (212) 815-6213 Receive and Deliver Window
New York, New York 10286-1248 CONFIRM BY New York, New York 10286
TELEPHONE:
(800) 507-9357
</TABLE>

<PAGE>
<TABLE>
<S> <C> <C>
THE INFORMATION
AGENT FOR THE OFFER
IS:
MORROW & CO., INC.
909 Third
Avenue -- 20th Floor
New York, New York
10022
(800) 662-5200
or
(212) 754-8000
(Call Collect)

THE DEALER MANAGER
FOR THE OFFER IS:
MERRILL LYNCH & CO.
250 Vesey Street
New York, New York
10281
(212) 236-4565 (Call
Collect)
</TABLE>

NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF DEPOSITARY SHARES
EACH REPRESENTING
A ONE-FOURTH INTEREST IN A SHARE OF
8.40% SERIES C CUMULATIVE PREFERRED STOCK,
PAR VALUE $1.00 PER SHARE
OF
BOWATER INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 16, 1995

This form or a facsimile hereof must be used to accept the Offer (as defined
below) if:
(a) depositary receipts for Depositary Shares (the "Depositary Shares"),
each representing a one-fourth interest in a share of 8.40% Series C Cumulative
Preferred Stock, par value $1.00 per share, liquidation preference $100 per
share, of BOWATER INCORPORATED, a Delaware corporation (the "Company"), cannot
be delivered to the Depositary on or prior to the Expiration Date (as defined in
Section 4 of the Company's Offer to Purchase dated October 16, 1995 (the "Offer
to Purchase")); or
(b) the procedure for book-entry transfer (set forth in Section 5 of the
Offer to Purchase) cannot be completed on a timely basis; or
(c) the Letter of Transmittal (or a facsimile thereof) and all other
required documents cannot be delivered to the Depositary on or prior to the
Expiration Date.

This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See Section 5 of the Offer to
Purchase.
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY FACSIMILE TRANSMISSION
BY MAIL: (FOR ELIGIBLE INSTITUTIONS ONLY): BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Confirm by Telephone: Receive and Deliver Window
New York, New York 10286-1248 (800) 507-9357 New York, New York 10286
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONES LISTED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
(as defined in the Offer to Purchase) under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.

<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal (which, together with the Offer to Purchase, constitutes the
"Offer"), receipt of which is hereby acknowledged, the number of Depositary
Shares specified below pursuant to the guaranteed delivery procedure set forth
in Section 5 of the Offer to Purchase.
No. of Depositary Shares
tendered
SIGN HERE

Depositary Shares
(Signature(s))

Certificate Nos.
(Signature(s))
(if available):

(Name(s)) (Please Print)

(Address)
If Depositary Shares will be delivered
by book-entry transfer:

(Zip Code)
Name of Tendering Institution:

(Area Code and Telephone No.)
Account
at:
The Depository Trust Company
Midwest Securities Trust Company
Philadelphia Depository Trust Company
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a financial institution that is a participant in the
Securities Agents Medallion Program, the New York Stock Exchange Medallion
Program, or the Stock Exchange Medallion Program, guarantees (a) that the above
named person(s) has (have) a "net long position" in the Depositary Shares
tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange
Act of 1934, as amended, and (b) to deliver to the Depositary either the
depositary receipts representing the Depositary Shares tendered hereby, in
proper form for transfer, or confirmation of the book-entry transfer of such
Depositary Shares into the Depositary's account at The Depository Trust Company,
the Midwest Securities Trust Company or the Philadelphia Depository Trust
Company, in any such case together with a properly completed and duly executed
Letter(s) of Transmittal (or facsimile(s) thereof), with any required signature
guarantees and any other required documents within three New York Stock Exchange
trading days after the execution of this notice.

(Name of Firm)

(Authorized Signature)

(Name)

(Address)

(Zip Code)

(Area Code and Telephone No.)
Dated:
DO NOT SEND DEPOSITARY RECEIPTS WITH THIS FORM. YOUR DEPOSITARY RECEIPTS MUST BE
SENT WITH THE LETTER OF TRANSMITTAL.

World Financial Center
North Tower
New York, New
York 10281-1328
212 449 1000
(Merrill Lynch Logo OFFER TO PURCHASE FOR CASH
appears here) BY
BOWATER INCORPORATED
OF
ANY AND ALL OF THE OUTSTANDING DEPOSITARY SHARES,
EACH REPRESENTING
A ONE-FOURTH INTEREST IN A SHARE OF ITS
8.40% SERIES C CUMULATIVE PREFERRED STOCK,
PAR VALUE $1.00 PER SHARE
AT
$27.875 NET PER DEPOSITARY SHARE
October 16, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed to act as Dealer Manager by Bowater Incorporated, a
Delaware corporation (the "Company"), in connection with its offer to purchase
any and all of the outstanding Depositary Shares (the "Depositary Shares"), each
representing a one-fourth interest in a share of its 8.40% Series C Cumulative
Preferred Stock, par value $1.00 per share, liquidation preference $100 per
share, at $27.875 per Depositary Share, net to the seller in cash (the "Purchase
Price"), upon the terms and subject to the conditions set forth in the Company's
Offer to Purchase dated October 16, 1995 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with the Offer to Purchase,
constitutes the "Offer").
For your information and for forwarding to your clients for whom you hold
Depositary Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. Offer to Purchase dated October 16, 1995;
2. Letter of Transmittal for your use and for the information of your
clients, together with GUIDELINES FOR CERTIFICATION OF TAXPAYER NUMBER ON
SUBSTITUTE FORM W-9 providing information relating to backup Federal income
tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Depositary Shares and all other required documents cannot be delivered to
The Bank of New York (the "Depositary") on or prior to the Expiration Date
(as defined in the Offer to Purchase) or if the procedure for book-entry
transfer cannot be completed on a timely basis; and
4. A form of letter that may be sent to your clients for whose
accounts you hold Depositary Shares registered in your name or in the name
of your nominee, with space provided for obtaining such client's
instructions and designation of Soliciting Dealer with regard to the Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON
NOVEMBER 15, 1995, UNLESS THE OFFER IS EXTENDED.

<PAGE>
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION AS TO WHETHER ANY HOLDER OF DEPOSITARY SHARES SHOULD TENDER ANY
OR ALL OF SUCH HOLDER'S DEPOSITARY SHARES PURSUANT TO THE OFFER. HOLDERS OF
DEPOSITARY SHARES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER DEPOSITARY
SHARES AND, IF SO, HOW MANY DEPOSITARY SHARES TO TENDER.
The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee of $0.375 per Depositary Share, or for any transaction equal to
or exceeding 20,000 Depositary Shares, $0.25 per Depositary Share, for any
Depositary Shares tendered, accepted for payment and paid for pursuant to the
Offer. For purposes of this letter, "Soliciting Dealer" includes (i) any broker
or dealer in securities, including the Dealer Manager in its capacity as a
broker or dealer, who is a member of any national securities exchange or of the
National Association of Securities Dealers, Inc. (the "NASD"), (ii) any foreign
broker or dealer not eligible for membership in the NASD who agrees to conform
to the NASD's Rules of Fair Practice in soliciting tenders outside the United
States to the same extent as though it were an NASD member, or (iii) any bank or
trust company, any one of whom has solicited and obtained a tender of Depositary
Shares pursuant to the Offer. No such fee shall be payable to a Soliciting
Dealer in respect of Depositary Shares registered in the name of the Soliciting
Dealer unless (i) the Depositary Shares are held by the Soliciting Dealer as
nominee and the Depositary Shares are being tendered for the benefit of one or
more beneficial owners identified on the Letter of Transmittal or the Notice of
Solicited Tenders or (ii) the Depositary Shares are being tendered for the
benefit of the Soliciting Dealer and the Soliciting Dealer certifies on the
Letter of Transmittal or the Notice of Solicited Tenders that such Depositary
Shares were acquired by the Soliciting Dealer (x) after the announcement of the
Offer, (y) at a price not in excess of the Purchase Price, and (z) from a holder
solicited by the Soliciting Dealer. For purposes of clause (z), "solicited"
shall mean direct contact (other than the mailing of the tender offer materials)
with the holder relating to the tender of Depositary Shares beneficially owned
by the holder that resulted in the purchase by the Soliciting Dealer of such
Depositary Shares. No fee shall be payable to a Soliciting Dealer with respect
to the tender of Depositary Shares by a holder unless the Letter of Transmittal
accompanying the tender designates such Soliciting Dealer as such in the box
captioned "Solicited Tenders" or the Notice of Solicited Tenders accompanying
the tender designates such Soliciting Dealer. No fee shall be payable to a
Soliciting Dealer with respect to the tender of Depositary Shares by the holder
of record, for the benefit of the beneficial owner, unless the beneficial owner
has designated the Soliciting Dealer. No fee shall be payable to a Soliciting
Dealer unless the Soliciting Dealer returns a Notice of Solicited Tenders to the
Depositary within 3 business days after the Expiration Date. No fee shall be
payable to a Soliciting Dealer if the Soliciting Dealer is required for any
reason to transfer the amount of the fee to a depositing holder (other than
itself). No broker, dealer, bank, trust company or fiduciary shall be deemed to
be the agent of the Company, the Depositary, the Information Agent, or the
Dealer Manager for purposes of the Offer.
The Company will pay all stock transfer taxes applicable to its purchase of
Depositary Shares pursuant to the Offer, subject to Instruction 6 of the Letter
of Transmittal.
In order for a soliciting dealer to receive a solicitation fee, the
depositary must have received from the soliciting dealer a properly completed
and duly executed notice of solicited tenders in the form attached hereto (or a
facsimile thereof) within 3 business days after the expiration date.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent or the Dealer Manager at the addresses and telephone numbers
set forth on the back cover of the Offer to Purchase.
Very truly yours,

Merrill Lynch & Co.

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE COMPANY, THE DEPOSITARY, THE INFORMATION AGENT OR THE DEALER
MANAGER, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED HEREWITH AND STATEMENTS CONTAINED THEREIN.
2

<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Depositary Shares the tender of which you have
solicited. All Depositary Shares beneficially owned by a beneficial owner,
whether in one account or several, and in however many capacities, must be
aggregated for purposes of completing the tables below. Any questions as to what
constitutes beneficial ownership should be directed to the Depositary. If the
space below is inadequate, list the Depositary Shares in a separate signed
schedule and affix the list to this Notice of Solicited Tenders. Please do not
complete the sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE DEPOSITARY AT
THE ADDRESS SET FORTH ON THE BACK COVER OF THE OFFER TO PURCHASE WITHIN THREE
BUSINESS DAYS AFTER THE EXPIRATION OF THE OFFER. ALL QUESTIONS CONCERNING
NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO THE INFORMATION AGENT AT THE
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THE OFFER TO PURCHASE.

SOLICITED TENDERS OF DEPOSITARY SHARES NOT
BENEFICIALLY OWNED BY SOLICITING DEALER

For Any Transaction Less Than 20,000 Depositary Shares
<TABLE>
<CAPTION>
TO BE COMPLETED TO BE COMPLETED TO BE COMPLETED TO BE COMPLETED
BY THE SOLICITING BY THE SOLICITING ONLY BY ONLY BY
DEALER DEALER DEPOSITARY DEPOSITARY
Number of Shares VOI Ticket Number of Shares Fee $0.375 per
Beneficial Owners Tendered Number* Accepted Depositary Share
<S> <C> <C> <C> <C>
Beneficial Owner No. 1........
Beneficial Owner No. 2........
Beneficial Owner No. 3........
Beneficial Owner No. 4........
Beneficial Owner No. 5........
Total.......................
</TABLE>

* Complete if Depositary Shares delivered by book-entry transfer.

For Any Transaction Equal to or Exceeding 20,000 Depositary Shares
<TABLE>
<CAPTION>
TO BE COMPLETED TO BE COMPLETED TO BE COMPLETED TO BE COMPLETED
BY THE SOLICITING BY THE SOLICITING ONLY BY ONLY BY
DEALER DEALER DEPOSITARY DEPOSITARY
Number of Shares VOI Ticket Number of Shares Fee $0.25 per
Beneficial Owners Tendered Number* Accepted Depositary Share
<S> <C> <C> <C> <C>
Beneficial Owner No. 1........
Beneficial Owner No. 2........
Beneficial Owner No. 3........
Beneficial Owner No. 4........
Beneficial Owner No. 5........
Total.......................
</TABLE>

* Complete if Depositary Shares delivered by book-entry transfer.
3

<PAGE>
SOLICITED TENDERS OF DEPOSITARY SHARES
BENEFICIALLY OWNED BY SOLICITING DEALER

* Complete if Depositary Shares delivered by book-entry transfer.

All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Depositary,
in its sole discretion, which determination will be final and binding. Neither
the Depositary nor any other person will be under any duty to give notification
of any irregularities in any Notice of Solicited Tenders or incur any liability
for failure to give such notification.
The undersigned hereby confirms that: (i) it has complied with the
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the applicable rules and regulations thereunder, in connection with such
solicitation; (ii) it is entitled to such compensation for such solicitation
under the terms and conditions of the Offer to Purchase; (iii) in soliciting
tenders of Depositary Shares, it has used no soliciting materials other than
those furnished by the Company; and (iv) if it is a foreign broker or dealer not
eligible for membership in the NASD, it has agreed to conform to the NASD's
Rules of Fair Practice in making solicitations.
The undersigned hereby certifies that the Depositary Shares beneficially
owned by the Soliciting Dealer and tendered in connection herewith were acquired
by the Soliciting Dealer (x) after the announcement of the Offer, (y) at a price
not in excess of the Purchase Price, and (z) from a holder solicited by the
Soliciting Dealer. For purposes of clause (z), "solicited" shall mean direct
contact (other than the mailing of the tender offer materials) with the holder
relating to the tender of Depositary Shares beneficially owned by the holder
that resulted in the purchase by the Soliciting Dealer of such Depositary
Shares.
<TABLE>
<S> <C>
Printed Firm Name Address

Authorized Signature Area Code and Telephone Number
</TABLE>

OFFER TO PURCHASE FOR CASH
BY
BOWATER INCORPORATED
OF
ANY AND ALL OF THE OUTSTANDING DEPOSITARY SHARES,
EACH REPRESENTING
A ONE-FOURTH INTEREST IN A SHARE OF ITS
8.40% SERIES C CUMULATIVE PREFERRED STOCK,
PAR VALUE $1.00 PER SHARE
AT
$27.875 NET PER DEPOSITARY SHARE
THE TENDER OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
EASTERN TIME, ON NOVEMBER 15, 1995, UNLESS THE OFFER IS EXTENDED.
October 16, 1995
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated October 16,
1995 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with the Offer to Purchase, constitutes the "Offer"), in connection
with the Offer by Bowater Incorporated, a Delaware corporation (the "Company"),
to purchase any and all of the outstanding depositary shares (the "Depositary
Shares"), each representing a one-fourth interest in a share of its 8.40% Series
C Cumulative Preferred Stock, par value $1.00 per share, liquidation preference
$100 per share, at $27.875 per Depositary Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer. We are the
holder of record of the Depositary Shares held for your account. A tender of
your Depositary Shares can be made only by us as the holder of record and
pursuant to your instructions. THE ENCLOSED FORM OF LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
DEPOSITARY SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the Depositary Shares held by us for your account, upon the terms and subject to
the conditions set forth in the Offer. We also request that you designate, in
the box captioned "Solicited Tenders", any Soliciting Dealer who solicited your
tender of Depositary Shares.
Your attention is directed to the following:
1. The Offer and withdrawal rights expire at 12:00 midnight, Eastern Time,
on November 15, 1995, unless the Offer is extended.
2. The Offer is not conditioned upon any minimum number of Depositary
Shares being tendered. The Offer is, however, subject to certain other
conditions, as described in Section 8 of the Offer to Purchase.
3. Any stock transfer taxes applicable to the sale of Depositary Shares to
the Company pursuant to the Offer will be paid by the Company, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
4. Tendering holders of Depositary Shares will not be obligated to pay
brokerage fees or commissions in connection with their tenders pursuant
to the Offer.
If you wish to have us tender any or all of your Depositary Shares, please
so instruct us by completing, executing and returning to us the attached
instruction form. An envelope to return your instructions to us is enclosed. If
you authorize the tender of your Depositary Shares, all such Depositary Shares
will be tendered unless otherwise specified on the attached instruction form.
Your instructions to us should be forwarded promptly in order to permit us to
execute the Letter of Transmittal and tender your Depositary Shares on your
behalf in accordance with the terms of the Offer and prior to the expiration of
the Offer.
THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL AND ANY AMENDMENTS OR SUPPLEMENTS THERETO. THE OFFER IS NOT BEING
MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF
DEPOSITARY SHARES IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR
ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. IN THOSE JURISDICTIONS THE LAWS OF WHICH REQUIRE THAT THE OFFER BE
MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON
BEHALF OF THE COMPANY BY MERRILL LYNCH & CO. OR ONE OR MORE REGISTERED BROKERS
OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.

<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ANY AND ALL
OF THE OUTSTANDING DEPOSITARY SHARES, EACH REPRESENTING A ONE-FOURTH
INTEREST IN A SHARE OF 8.40% SERIES C CUMULATIVE PREFERRED STOCK,
PAR VALUE $1.00 PER SHARE
OF
BOWATER INCORPORATED
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated October 16, 1995, and the related form of Letter of
Transmittal in connection with the offer by Bowater Incorporated, a Delaware
corporation (the "Company"), to purchase any and all of the outstanding
Depositary Shares (the "Depositary Shares"), each representing a one-fourth
interest in a share of its 8.40% Series C Cumulative Preferred Stock, par value
$1.00 per share, liquidation preference $100 per share, at $27.875 per
Depositary Share, net to the undersigned in cash.
This will instruct you to tender the number of Depositary Shares indicated
below held by you for the account of the undersigned, upon the terms and subject
to the conditions set forth in the Offer to Purchase and the related form of
Letter of Transmittal.
By checking this box, all Depositary Shares held for the account of the
undersigned will be tendered. If fewer than all Depositary Shares are to be
tendered, please check the box AND indicate below the aggregate number of
Depositary Shares to be tendered. (Unless otherwise indicated, it will be
assumed that all Depositary Shares held for the account of the undersigned
are to be tendered.)
Depositary Shares

Please designate in the box below any Soliciting Dealer who solicited your
tender:
SOLICITED TENDERS
The undersigned represents that the Soliciting Dealer who solicited and
obtained this tender is:
Name of Firm:
(Please Print)
Name of Individual Broker or Financial Consultant:
Identification Number (if known):
Address:

(Include Zip Code)
SIGN HERE
<TABLE>
<S> <C>
(Signature(s))
(Please print name(s), address(es) and telephone Tax Identification or Social Security Number(s)
number(s) here)
</TABLE>

Date , 1995

Media Contact:
Robert D. Leahy
(803) 282-9571 (Office)
(803) 234-0941 (Home)

Analyst Contact:
Donald J. D'Antuono
(803) 282-9370 (Office)
(803) 234-5899 (Home)

FOR IMMEDIATE RELEASE
MONDAY, OCTOBER 16, 1995

BOWATER ANNOUNCES THIRD QUARTER RESULTS
AND OFFER TO PURCHASE PREFERRED SHARES

Greenville, SC -- Bowater Incorporated (NYSE:BOW) today reported
earnings for the 1995 third quarter of $88.1 million, or $1.93 per
fully diluted share, before a loss incurred in connection with the
anticipated sale of its communications papers subsidiary ($30
million or $.68 per fully diluted share) and the extraordinary
charge associated with the prepayment of $117 million of 8.25%
Notes ($5.2 million or $.12 per fully diluted share). Taken
together, these items reduced net income by $35.2 million, or $.80
per share, to $52.9 million or $1.13 per share. This compares to
net income of $10.5 million, or $.16 per share, for the same period
last year. Third quarter 1995 sales were $520.9 million, compared
to $348.2 million for the third quarter of last year.

The third quarter earnings of $1.93 per share compares with
1994's third quarter loss of $.13 per share before an after-tax
gain of $.29 per share for the sale of timberlands. For the third
quarter 1995, there were 44.3 million common and common equivalent
shares outstanding as compared with 37 million outstanding for the
third quarter 1994.

Net income for the first nine months of 1995 was $151.7
million, or $3.31 per fully diluted share and includes the after
tax charges for both the above loss on the anticipated sale of the
subsidiary and two debt repurchases, totaling $41.3 million. This
compares to a net loss of $25.8 million or $1.04 per share, for the
nine months ended October 1, 1994. Sales for the first nine months
of 1995 were $1.5 billion, compared for the same period last year.

"We were pleased with these results," said Arnold M. Nemirow,
President and Chief Executive Officer. "Average transaction prices
increased in the third quarter as demand for our core business
products remained strong. Cost reduction activities were another
positive factor, while higher raw material costs and annual
maintenance shutdowns at three of our five mills reduced earnings
somewhat. Our debt prepayment in the third quarter brings our
total debt reduction for the year to approximately $300 million,
lowering our debt by 27%."

The company also announced commencement of an offer to
purchase the outstanding Depositary Shares, each representing a
one-fourth interest in a share of its 8.4% Series C Cumulative
Preferred Stock having a face value of $85 million. The offer
begins on October 16, 1995, and will, unless extended, expire on
November 15, 1995. The purchase price for each Depositary Share is
$27.875. Merrill Lynch & Co. will serve as the exclusive dealer
manager of the offering, the Bank of New York will serve as
depositary and Morrow & Co., Inc., will serve as the information
agent.

Bowater Incorporated is the largest producer of newsprint in
the U.S., and also makes coated and uncoated groundwood papers,
bleached kraft pulp, continuous computer forms and lumber products.
It has five paper mills, eight converting plants and 3.7 million
acres of timberlands in the U.S. and Canada. Bowater Incorporated
common stock is listed on the New York Stock Exchange, U.S.
regional exchanges, the London Stock Exchange and the Swiss Stock
Exchanges.

FORM OF SUMMARY ADVERTISEMENT DATED OCTOBER 17, 1995

This announcement is neither an offer to purchase nor a
solicitation of an offer to sell Depositary Shares. The Offer is
made solely by the Offer to Purchase dated October 16, 1995 and
the related Letter of Transmittal and is not being made to (nor
will tenders be accepted from or on behalf of) holders of
Depositary Shares residing in any jurisdiction in which the
making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any
jurisdiction the securities laws of which require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed
made on behalf of the Company by one or more brokers or dealers
licensed under the laws of such jurisdiction.

Offer to Purchase for Cash

Bowater Incorporated

Any and All of the Outstanding Depositary Shares, Each
Representing a One-Fourth Interest in a Share of Its
8.40% Series C Cumulative Preferred Stock,
Par Value $1.00 Per Share

$27.875 Net Per Depositary Share

Bowater Incorporated, a Delaware corporation (the
"Company"), is offering to purchase any and all of the
outstanding Depositary Shares (the "Depositary Shares"), each
representing a one-fourth interest in a Share of its 8.40% Series
C Cumulative Preferred Stock, par value $1.00 per share,
liquidation preference $100 per share (the "Series C Cumulative
Preferred Stock"), at $27.875 per Depositary Share, net to the
seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated October 16, 1995 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer").

THE TENDER OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, EASTERN TIME, ON NOVEMBER 15, 1995, UNLESS THE OFFER IS
EXTENDED.

THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE
OFFICERS MAKE NO RECOMMENDATION AS TO WHETHER ANY HOLDER OF
DEPOSITARY SHARES SHOULD TENDER ANY OR ALL OF SUCH HOLDER'S
DEPOSITARY SHARES PURSUANT TO THE OFFER. HOLDERS OF DEPOSITARY
SHARES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER DEPOSITARY
SHARES AND, IF SO, HOW MANY DEPOSITARY SHARES TO TENDER.

The record date for the 1995 third quarter regular quarterly
cash dividend of $0.525 for the Series C Cumulative Preferred
Stock is September 11, 1995, and the related payment date is
October 16, 1995. Accordingly, holders of record as of September
11, 1995, of Depositary Shares tendered and purchased by the
Company will receive and be entitled to such regular quarterly
dividend to be paid by the Company for the third quarter of 1995,
but will not receive any accrued dividends for the fourth quarter
of 1995. See Section 8 of the Offer to Purchase.
The Company is making the Offer in order to reduce the high
fixed cost obligations of the preferred stock dividends. The
Series C Cumulative Preferred Stock has the highest dividend
costs of any of the Company's preferred stock. The Offer will
enable the Company to reduce its dividend requirements and annual
administrative expenses. The Company believes that, given the
current market price of the Depositary Shares, the Company's
current financial condition (including its substantial current
cash and cash equivalents position), and the relative benefits
and disadvantages of repurchasing the Company's other series of
preferred stock or public debt, the purchase of Depositary Shares
pursuant to the Offer is economically attractive to the Company.
The Company also believes the Offer is fair to holders of
Depositary Shares. The Offer will provide holders who are
considering a sale of all or a portion of the Depositary Shares
the opportunity to sell those Depositary Shares for cash without
the usual transaction costs associated with open-market sales.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF
SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN
OTHER CONDITIONS. SEE SECTION 8 OF THE OFFER TO PURCHASE.
Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and
conditions of the extension or amendment), the Company will
accept for payment, and will pay for Depositary Shares validly
tendered and not withdrawn on or prior to 12:00 midnight, Eastern
Time, on November 15, 1995, or the latest time and date at which
the Offer, if extended by the Company, shall expire (the
"Expiration Date"). The Company expressly reserves the right, in
its sole discretion, at any time or from time to time, to extend
the period of time during which the Offer is open by giving oral
or written notice of such extension to The Bank of New York (the
"Depositary") and making a public announcement thereof. See
Sections 4, 5, 7 and 13 of the Offer to Purchase.
The Company will pay to a Soliciting Dealer (as defined in
the Offer to Purchase) a solicitation fee of $0.375 per
Depositary Share, or for any transaction equal to or exceeding
20,000 Depositary Shares, $0.25 per Depositary Share, for any
Depositary Shares tendered, accepted for payment and paid for
pursuant to the Offer, subject to certain conditions. See
Section 14 of the Offer to Purchase.
Subject to the provisions in Section 6 of the Offer to
Purchase, Depositary Shares tendered pursuant to the Offer may be
withdrawn at any time on or prior to the Expiration Date and,
unless theretofore accepted for payment by the Company, may also
be withdrawn after 12:00 midnight, Eastern Time, on December 11,

1995. See Section 6 of the Offer to Purchase.
For a withdrawal to be effective, the Depositary must timely
receive (at one of the addresses set forth on the back cover of
the Offer to Purchase) a written or facsimile transmission of
notice of withdrawal. A notice of withdrawal must specify the
name of the person who tendered the Depositary Shares to be
withdrawn, the number of Depositary Shares to be withdrawn and
the name of the registered owner, if different from that of the
person who tendered such Depositary Shares. If the depositary
receipts have been delivered or identified in a Notice of
Guaranteed Delivery to the Depositary, then, prior to the release
of such depositary receipts, the tendering holder must also
submit the serial numbers shown on the particular depositary
receipts evidencing the Depositary Shares, and the signature on
the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in Section 3 of the Offer to Purchase)
(except in the case of Depositary Shares tendered by an Eligible
Institution). If Depositary Shares have been delivered pursuant
to the procedure for book-entry transfer set forth in Section 5
of the Offer to Purchase, the notice of withdrawal must specify
the name and the number of the account at the applicable
Depositary Institution (as defined in Section 5 of the Offer to
Purchase) to be credited with the withdrawn Depositary Shares and
otherwise comply with the procedures of the Depositary
Institution. A withdrawal of a tender of Depositary Shares may
not be rescinded, and Depositary Shares properly withdrawn will
thereafter be deemed not validly tendered for purposes of the
Offer. Withdrawn Depositary Shares may again be retendered on or
prior to the Expiration Date by following any of the procedures
described in Section 5 of the Offer to Purchase.
The Offer to Purchase and the Letter of Transmittal contain
important information that should be read before any decision is
made with respect to the Offer. These documents are being mailed
to recordholders of Depositary Shares and will be furnished to
brokers, dealers, banks and similar persons whose nominees appear
on the Company's shareholders list or, if applicable, who are
listed as participants in a clearing agency's security position
listing for subsequent transmittal of beneficial owners of
Depositary Shares.
The information required to be disclosed by Rule 13e-4(d)(1)
of the General Rules and Regulations under the Securities and
Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
Any questions or requests for assistance may be directed to
the Information Agent and the Dealer Manager at the addresses and
telephone numbers set forth below. Requests for additional
copies of the Offer to Purchase, Letter of Transmittal or other
tender offer materials may be directed to the Information Agent
and the Dealer Manager and such copies will be furnished at the
Company's expense. Shareholders may also contact their broker,
dealer, commercial bank or trust company for assistance
concerning the Offer.

The Information Agent for the Offer is:

Morrow & Co., Inc.
909 Third Avenue - 20th Floor
New York, New York 10022
(800) 662-5200 or
(212) 754-8000 (Call Collect)

The Dealer Manager for the Offer is:

Merrill Lynch & Co.
250 Vesey Street
World Financial Center - North Tower
(212) 236-4565 (Call Collect)

October 16, 1995

<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hyphens;
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.

Give the Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION
number of -- number of --
<S> <C> <C> <C>

1. An individual's account The individual
6. A valid trust, estate, or pension The legal entity (Do
2. Two or more individuals (joint The actual owner of trust not furnish the
account) the account or, if identifying number
combined funds, of the personal
any one of the representative or
individuals(1) trustee unless the
legal entity itself is
not designated in
3. Custodian account of a minor The minor(2) the account title.)(4)
(Uniform Gift to Minors Act)
7. Corporate account The corporation

4. a The usual revocable savings The grantor- 8. Religious, charitable, or The organization
trust account (grantor is also trustee(1) educational organization
trustee) account
b So-called trust account that is The actual owner(1)
not a legal or valid trust under 9. Partnership The partnership
State law

5. Sole proprietorship account The owner(3) 10. Association, club, or other tax- The organization
exempt organization

11. A broker or registered nominee The broker or
nominee

12. Account with the Department The public entity
of Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that receives
agricultural program payments

</TABLE>

(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You
may use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.

Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.

<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2

Obtain a Number
If you don't have a taxpayer identification number or you
don't know your number, obtain Form SS-5, Application
for a Social Security Number Card, or Form SS-4, Application for
Employer Identification Number, at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.

Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include
the following:

(bullet) A corporation.
(bullet) A financial institution.
(bullet) An organization exempt from tax under section 501(a), or an
individual retirement plan.
(bullet) The United States or any agency or instrumentality thereof.
(bullet) A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
(bullet) A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
(bullet) An international organization or any agency, or instrumentality
thereof.
(bullet) A registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
(bullet) A real estate investment trust.
(bullet) A common trust fund operated by a bank under section 584(a)
(bullet) An exempt charitable remainder trust, or a non-exempt trust described
in section 4947(a)(1).
(bullet) An entity registered at all times under the Investment Company Act
of 1940.
(bullet) A foreign central bank of issue.

Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:

(bullet) Payments to nonresident aliens subject to withholding under
section 1441.
(bullet) Payments to partnerships not engaged in a trade or business in the
U.S. and which have at least one nonresident partner.
(bullet) Payments of patronage dividends where the amount received is not
paid in money.
(bullet) Payments made by certain foreign organizations.

Payments of interest not generally subject to backup withholding include
the following:

(bullet) Payments of interest on obligations issued by individuals. Note: You
may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number
to the payer.
(bullet) Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
(bullet) Payments described in section 6049(b)(5) to nonresident aliens.
(bullet) Payments on tax-free covenant bonds under section 1451.
(bullet) Payments made by certain foreign organizations.

Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.

Certain payments other than interest, dividends, and patronage
dividends, that are not subject to information reporting are also not
subject to backup withholding. For details, see the regulations under
sections 6041, 6041A(a), 6045, and 6050A.

Privacy Act Notice.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may
also apply.

Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.

(2) Civil Penalty for False Information With Respect to Withholding.--If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.

(3) Criminal Penalty for Falsifying Information.--Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.

Retail Information Memorandum
Preferred Stock
Tender Offer
Merrill Lynch & Co.

M. L. SOLE DEALER MANAGER ATTENTION: Regional Managers
Sales Managers
Financial Consultants
October 16, 1995

Offer to Purchase for Cash
by
BOWATER INCORPORATED

of Any and All of the Outstanding Depositary Shares,
Each Representing
a One-Fourth Interest in a Share of its 8.40% Series C
Cumulative Preferred Stock, Par Value $1.00 Per Share
at
$27.875 Net Per
Depositary Share
(CUSIP #102183605)

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
EASTERN TIME, ON NOVEMBER 15, 1995, UNLESS THE OFFER IS EXTENDED.

SUMMARY HIGHLIGHTS

(bullet) Holders of the Depositary Shares should be advised of the
following: Bowater Incorporated will pay Merrill Lynch a fee
for each Depositary Share of Series C Cumulative Preferred
Stock validly tendered, accepted for payment and paid for
pursuant to the Offer.

(bullet) The Company will pay to a Soliciting Dealer a solicitation fee
of $0.375 per Depositary Share, or for any transaction equal
to or exceeding 20,000 Depositary Shares, $0.25 per Depositary
Share, for any Depositary Shares tendered, accepted for
payment and paid for pursuant to the Offer.

(bullet) Bowater Incorporated ("Bowater" or the "Company") is offering
to purchase any and all of the outstanding Depositary Shares
(the "Depositary Shares"), each representing a one-fourth
interest in a share of its 8.40% Series C Preferred Stock, par
value $1.00 per share, liquidation preference $100 per share
(the "Series C Cumulative Preferred Stock"), at $27.875 per
Depositary Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to
Purchase dated October 16, 1995 (the "Offer to Purchase") and
in the related Letter of Transmittal (which, together with the
Offer to Purchase, constitutes the "Offer").

(bullet) Holders of record as of September 11, 1995 of Depositary
Shares tendered and purchased by the Company will be entitled
to the regular quarterly cash dividend of $0.525 per
Depositary Share to be paid by the Company on October 16,
1995, for the third quarter of 1995, but will not receive any
additional accrued dividends with respect to the Depositary
Shares tendered and purchased by the Company.

(bullet) The Company is making the Offer in order to reduce the high
fixed cost obligations of the preferred stock dividends. The
Series C Cumulative Preferred Stock has the highest dividend
costs of any of the Company's preferred stock. The Offer will
enable the Company to reduce its dividend requirements and
annual administrative expenses. The Company believes that,
given the current market price of the Depositary Shares, the
Company's current financial condition (including its
substantial current cash and cash equivalents position), and
the relative benefits and disadvantages of repurchasing the
Company's other series of preferred stock or public debt, the
purchase of the Depositary Shares pursuant to the Offer is
economically attractive to the Company. The Company believes
the Offer is fair to holders of Depositary Shares. In making
this determination, the Company considered the following
factors: (a) the premium represented by the difference
between the consideration offered to holders of the Depositary
Shares and recent and historical trading prices of the
Depositary Shares and that the Offer gives holders of the
Depositary Shares the opportunity to sell their Depositary
Shares at a 5.19% premium over the closing sales price of $26.50
per Depositary Share on October 13, 1995 (the last trading day
prior to the announcement of the Offer); and (b) that the
Offer will provide holders who are considering a sale of all
or a portion of the Depositary Shares the opportunity to sell
those Depositary Shares for cash without the usual transaction
costs associated with open- market sales.

(bullet) Tendering holders of Depositary Shares will not be obligated
to pay brokerage commissions, solicitation fees or, subject to
the Instructions to the Letter of Transmittal, stock transfer
taxes on the purchase of Depositary Shares by the Company.
The Company will pay all charges and expenses of the
Depositary, Information Agent, Dealer Manager and any
Soliciting Dealer incurred in connection with the Offer.

(bullet) The purchase of Depositary Shares pursuant to the Offer will
reduce the number of holders of Depositary Shares and the
number of Depositary Shares that might otherwise trade
publicly, and, depending upon the number of Depositary Shares
so purchased, could adversely affect the liquidity and market
value of the remaining Depositary Shares held by the public.

For Internal Use Only

This memorandum relates to a Tender Offer. It is merely a summary for
informational purposes for Merrill Lynch personnel; it should be read
with and is qualified in its entirety by the Offering Document(s). Under
no circumstances may a copy of this report be shown, quoted or given to
any member of the public. Under no circumstances is it to be used or
considered as recommendation to buy or sell any security and is not to
be used to solicit tenders of shares. All financial consultants should
read the Offer to Purchase and the related Letter of Transmittal before
discussing the Tender Offer with Shareholders.

<PAGE>

SUMMARY

This summary is provided solely for the convenience of holders of
Depositary Shares and is qualified in its entirety by reference to the
full text and more specific details contained in the Offer to Purchase
and the related Letter of Transmittal and any amendments or supplements
hereto and thereto.

The Company................... Bowater Incorporated.

The Depositary Shares......... Depositary Shares, each representing a
one-fourth interest in a share of its
8.40% Series C Cumulative Preferred
Stock, $1.00 par value, $100 liquidation
preference, of the Company.

Listing....................... New York Stock Exchange ("NYSE")

Ticker........................ BOW Pr C (8.40% Series C Cumulative
Preferred Stock)

Number of Depositary
Shares Sought................ Any and all of the 3,400,000 outstanding
Depositary Shares.

Purchase Price................ $27.875 per Depositary Share, net to the
seller in cash.

Expiration Date............... Wednesday, November 15, 1995 at 12:00
midnight, Eastern Time, unless the
Company shall have extended the period of
time during which the Offer is open, in
which event the Expiration Date shall be
the latest time and date at which the
Offer, as so extended by the Company,
shall expire. Merrill Lynch will stop
accepting orders on Tuesday, November 14,
1995 at 6:30 p.m., Eastern Time.

How to Tender Depositary
Shares...................... See "Section 5. Procedure for Tendering
Depositary Shares" in the Offer to
Purchase. For further information, call
the Information Agent or Merrill Lynch.

Withdrawal Rights............ Tendered Depositary Shares may be
withdrawn at any time on or prior to the
Expiration Date of the Offer, and, if not
yet accepted for payment by the Company,
may also be withdrawn after 12:00
midnight, Eastern Time on December 11,
1995. See "Section 6. Withdrawal Rights"
in the Offer to Purchase. Merrill Lynch
will stop accepting withdrawal orders on
Tuesday, November 14, 1995 at 6:30 p.m.,
Eastern Time.

Purpose of Offer............. The Company is making the Offer in order
to reduce the high fixed cost obligations
of the preferred stock dividends. The
Company believes that, given its current
financial condition (including its
substantial current cash and cash
equivalents position) and the current
market price of the Depositary Shares, the
purchase of the Depositary Shares pursuant
to the Offer is economically attractive to
the Company. The Offer gives holders of
Depositary Shares the opportunity to sell
their Depositary Shares at a premium over
the market price prevailing prior to the
announcement of the Offer and without the
usual transaction costs associated with a
market sale. See "Section 1. Purpose of
the Offer; Certain Effects of the Offer;
Plans of the Company after the Offer" in
the Offer to Purchase.

Note: If during the account opening process, a shareholder had
indicated his/her desire to be notified directly regarding any SEC
actions, his/her name will appear on the non-objecting beneficial owners
list. This list is provided to the Information Agent in connection with
the tender. For this reason, some of your clients may be contacted by
the Information Agent.

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Market Price of Depositary
Shares...................... High Low
1994
Q1 $25.38 $23.38
Q2 23.50 22.00
Q3 23.75 22.00
Q4 23.50 20.50
1995
Q1 $25.00 $21.38
Q2 26.63 25.00
Q3 26.50 23.75
Q4 26.50 26.00
(through October 13, 1995)

On Friday, October 13, 1995, the last
trading day prior to the commencement of
the Offer, the closing price per
Depositary Share on the NYSE Composite
Tape was $26.50. Holders are urged to
obtain a current market quotation for the
Depositary Shares. See "Section 9. Price
Range of the Depositary Shares;
Dividends" in the Offer to Purchase.

Dividends..................... Holders of record as of September 11,
1995 of Depositary Shares tendered and
purchased by the Company will be entitled
to the regular quarterly cash dividend of
$0.525 per Depositary Share to be paid by
the Company on October 16, 1995, for the
third quarter of 1995, but will not
receive any additional accrued dividends
with respect to the Depositary Shares
tendered and purchased by the Company.

Solicitation Fee.............. Not payable by holders. The Company will
pay to a Soliciting Dealer a solicitation
fee of $0.375 per Depositary Share, or
for any transaction equal to or exceeding
20,000 Depositary Shares, $0.25 per
Depositary Share, for any Depositary
Shares tendered, accepted for payment and
paid for pursuant to the Offer. See
"Section 14. Fees and Expenses" in the
Offer to Purchase.

Holders of the Depositary Shares should
be advised of the following: Bowater
Incorporated will pay Merrill Lynch a fee
for each Depositary Share of Series C
Cumulative Preferred Stock validly
tendered, accepted for payment and paid
for pursuant to the Offer.

Stock Transfer Tax............ None, except as provided in Instruction 6
of the Letter of Transmittal.

Certain Federal Income Tax
Consequences................. Sales of Depositary Shares by holders
thereof pursuant to the Offer will be
taxable transactions for Federal income
tax purposes and may also be taxable
transactions under applicable state,
local, foreign and other tax laws. The
Federal income tax consequences to a
holder of Depositary Shares may vary
depending upon the holder's particular
facts and circumstances. Certain
additional federal income tax information
is set forth in "Special Factors: Section
2. Certain Federal Income Tax
Consequences" in the Offer to Purchase,
but it is for general information only.
Each holder of Depositary Shares is urged
to consult and rely on the holder's own
tax advisor with respect to the tax
consequences to the holder of tendering
Depositary Shares pursuant to the Offer.

Payment Date.................. Promptly after the Expiration Date of the
Offer.

Further Information........... Additional copies of the Offer to
Purchase and the Letter of Transmittal
may be obtained by contacting Morrow &
Co., Inc., (800) 662-5200 (toll free) or
(212) 754-8000 (call collect).

Questions about the Offer should be
directed to Merrill Lynch at (212)
236-4565 (call collect).

<PAGE>

INFORMATION SOURCES
Any questions or requests for assistance or for copies of the Offer to
Purchase or Letter of Transmittal may be directed as follows:

Morrow & Co., Inc.
(Information Agent)
909 Third Avenue
New York, New York 10022
(800) 662-5200 (toll free)
or
(212) 754-8000 (call collect)

Questions about the tender procedures should be directed to:

Merrill Lynch & Co.
250 Vesey Street
New York, NY 10281

Marketing Support
(212) 236-4565 (call collect)

Questions about the Offer should be directed to:

Eastern Sales Division Western Sales Division Central Sales Division
(212) 449-5984 (212) 449-5981 (212) 449-5993

For current update, see:

PRI XPNA-L

THE COMPANY

Bowater Incorporated, headquartered in Greenville, South Carolina, is a
major producer of wood fiber products. The Company is the largest
manufacturer of newsprint in the United States and the second largest in
North America. Bowater is also one of the largest U.S. producers of
newsprint containing recycled fiber. Other important wood fiber
products made by Bowater include coated papers, book papers, groundwood
specialties and market pulp as well as virgin fiber and recycled
directory paper. The Company's products are marketed worldwide.
Bowater owns and operates fully integrated manufacturing facilities in
Catawba, South Carolina; Calhoun, Tennessee; Millinocket and East
Millinocket, Maine; and Liverpool, Nova Scotia, Canada. Supporting
these operations are 3.7 million acres of timberlands controlled by the
Company.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Sales of Depositary Shares by holders thereof pursuant to the Offer will
be taxable transactions for Federal income tax purposes and may also be
taxable transactions under applicable state, local, foreign and other
tax laws. The Federal income tax consequences to a holder of Depositary
Shares may vary depending upon the holder's particular facts and
circumstances. See "Special Factors: Section 2. Certain Federal Income
Tax Consequences" in the Offer to Purchase.

Each holder of Depositary Shares is urged to consult and rely on the
holder's own tax advisor with respect to the tax consequences to the
holder (including the applicability and effect of the constructive
ownership rules and state, local and foreign tax laws) of tendering
Depositary Shares pursuant to the Offer.

Holders of Depositary Shares are urged to consult their own tax advisors
concerning the possible impact of the receipt of cash from the Company
pursuant to the Offer on their obligation to make estimated tax
payments.

<PAGE>

PROCEDURES FOR TENDERING

Any holder of Depositary Shares desiring to tender all or any portion of
such holder's Depositary Shares should either (i) complete the Letter of
Transmittal in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other required documents to The
Bank of New York (the "Depositary"), and either mail or deliver the
depositary receipts evidencing such Depositary Shares to the Depositary
along with the Letter of Transmittal or follow the procedure for book-
entry transfer set forth in Section 5 of the Offer to Purchase, or (ii)
request such holder's broker, dealer, commercial bank, trust company or
nominee to effect the transaction for such holder. Holders of
Depositary Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such person if they
desire to tender their Depositary Shares. Holders who wish to tender
Depositary Shares and whose depositary receipts for such Depositary
Shares are not immediately available should tender such Depositary
Shares by following the procedures for guaranteed delivery set forth in
Section 5 of the Offer to Purchase.

Facsimile copies of the Letter of Transmittal, properly completed and
duly executed, will be accepted. The Letter of Transmittal, depositary
receipts for Depositary Shares and any other required documents should
be sent or delivered by each holder of Depositary Shares or such
holder's broker, dealer, commercial bank or trust company to the
Depositary at one of its addresses set forth below.

The Depositary for the Offer is:

The Bank of New York

[CAPTION]
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By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
<S> <C> <C>
The Bank of New York (for Eligible Institutions Only) The Bank of New York
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Department
New York, New York 10286-1248 New York, New York 10286

Confirm by Telephone:
(800) 507-9357

</TABLE>

Questions and requests for assistance or for copies of the Offer to
Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery
may be directed to Morrow & Co., Inc. (the Information Agent) or Merrill
Lynch & Co. (Dealer Manager).

<PAGE>

ORDER ENTRY PROCEDURES FOR TENDERING
BOWATER INCORPORATED 8.40% SERIES C PREFERRED STOCK

The offer outlined is eligible for "on-line" order entry and can be
accessed via the Bridge System.

To enter instructions to participate in the offer, please follow these
steps:

To obtain direct access to the Order Entry Screen - enter OEE in the
function field and REO in the select field. The following formatted
screen will appear - please fill in the appropriate fields indicated.

REORGANIZATION ORDER ENTRY
SECURITY NBR: 070R8 QTY: (# of shares to be tendered)

PLAN SYMBOL: X00704

PRICE: (does not apply)

PRORATION QTY: (does not apply)

ACCT#: (customer account) FC# : ????

CONDITION: * CONDITION DATE: *

P&S: (does not apply)

TRANSFER ACCT :

CFM QTY: (repeat # of shares to be tendered)
ORDER READ TO CUST Y/N: Y

Upon completion of the screen hit ENTER - the system will edit the
instruction on-line and highlight any problems with the instruction.
Once reviewed and accepted, enter OK in the action field and hit ENTER
to input your instruction.

All instructions, once input, can be viewed on OIF.

*The CONDITION and COND DATE fields are to be used when Bowater
Incorporated shares are being deposited and are not currently long in
the account. To enter instructions on the condition that the securities
are being deposited, enter DEP in the condition field, and the date
(MMDDYY) in the con date field.

NOTE: In addition, the above formatted screen can be accessed while
reviewing the cashiers memo in the RCI function by entering OE in the
action field.

<PAGE>

For those offices unable to access the OEE (automated order entry), you
may enter a formatted instruction on a Code 18 to wirecall - TND - by
filling in a Sell Order like the one shown below.

(Blank Sell Order)

NYSE RL ORDER NO. SYMBOL SL SSHRT
ASE RC ; ;; XOS

QUANTITY SYMBOL DESCRIPTION (PLEASE PRINT)
ODD
ML ODL
LOT

PRICE QUALIFIERS OTC FOR IOC TRADING INST.
MONEY -- --- --- ---
BER ; DAY ONE AON UNSL
FUNDS

CMA/ CXI SI CTC TELDING INSTRUCTIONS
MA/ CM SSHRT
CMA OTS BAY
FUNDS
MKTG KG OFFCE NO MO DAY YR ACCOUNT NUMBER
TRNTO KX REF CDX

B VERIFY ACCOUNT NUMBER CUSTOMER NAME
O C KC
N O KE
D R KF AE NO. UTRA OFFC
S P

OTHER P&S/MARGIN DATA
TND USP RAP ; MISC.

(Completed Sell Order)

NYSE RL ORDER NO. SYMBOL SL SSHRT
ASE RC ; x00704 ;; XOS

QUANTITY SYMBOL DESCRIPTION (PLEASE PRINT)
ODD
ML ODL
LOT (NO. of Shares to be Tendered) 070R8

PRICE QUALIFIERS OTC FOR IOC TRADING INST.
MONEY -- --- --- ---
BER ; DAY DNR AON UNSL
FUNDS

CMA/ CXI SI CTC TELDING INSTRUCTIONS
MA/ CM SSHRT
CMA OTS BAY
FUNDS
MKTG KG OFFCE NO. MO DAY YR ACCOUNT NUMBER
TRNTO KX REF CDX

B VERIFY ACCOUNT NUMBER CUSTOMER NAME
O C KC
N O KE
D R KF AE NO. UTRA OFFC
S P

OTHER P&S/MARGIN DATA
TND USP RAP ; MISC.

<PAGE>

NOTES