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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 9, 1998
BOWATER INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware 1-8712 62-0721803
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification Number)
55 East Camperdown Way
Greenville, SC 29602
(Address of principal executive offices)
Registrant's telephone number, including area code: (864) 271-7733
None
(Former name or former address, if changed since last report)
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<PAGE>
Item 5. Other Events.
On March 9, 1998, Bowater Incorporated, a Delaware corporation
("Bowater") entered into an Arrangement Agreement (the "Arrangement
Agreement") dated as of March 9, 1998 with Avenor Inc. ("Avenor") pursuant
to which Bowater and Avenor agreed to engage in a transaction which has the
economic effect of Bowater acquiring Avenor for C$35 (US$24.67) per share in
cash and securities, or approximately C$3.5 billion (US$2.47 billion) in
the aggregate including assumed debt.
Pursuant to the Arrangement Agreement, Avenor will apply to the
Ontario Court of Justice for an order for an arrangement (the
"Arrangement") under the provisions of Section 192 of the Canada Business
Corporations Act, pursuant to which Bowater will acquire outstanding common
shares of Avenor ("Avenor Common Shares") and each holder of Avenor Common
Shares (other than holders who exercise and perfect their dissenters'
rights) will be entitled to receive C$35 for each Avenor Common Share held
by such holder, payable, at the election of such holder and subject to
proration, in cash, Avenor Exchangeable Shares (as hereinafter defined),
shares of common stock, par value $1 per share of Bowater ("Bowater Common
Stock"), or a combination of the foregoing. Each holder of an Avenor Common
Share will have the opportunity to indicate on an election form whether
such holder wishes to receive cash, Avenor Exchangeable Shares or shares of
Bowater Common Stock with respect to each Avenor Common Share held by such
holder (subject to possible proration). Each Avenor Common Share for which
an effective cash election is made will be exchanged for cash in an amount
equal to C$35 (subject to possible proration). Each Avenor Common Share for
which an effective election to receive Avenor Exchangeable Shares is made
will be exchanged for a number of Avenor Exchangeable Shares equal to the
Exchange Ratio (subject to possible proration). As used herein, the
"Exchange Ratio" means C$35 divided by the product of the Average Trading
Price of Bowater Common Stock (defined as the weighted average trading
price of Bowater Common Stock on the New York Stock Exchange for the 20
trading days ending on the third business day prior to the effective date
of the Arrangement, but not more than US$55.6187 or less than US$45.5062)
multiplied by the value in Canadian dollars of one U.S. dollar on the last
of such trading days. Each Avenor Common Share for which an effective
election to receive Bowater Common Stock is made will be exchanged for a
number of shares of Bowater Common Stock equal to the Exchange Ratio
(subject to possible proration). If a holder of an Avenor Common Share
fails to make an effective election with respect to an Avenor Common Share,
such holder will be deemed to have elected to exchange such share for
Avenor Exchangeable Shares. The maximum aggregate amount of cash that may
be paid to holders of Avenor Common Shares will be equal to the product of
(i) C$35, (ii) the number of Avenor Common Shares outstanding on the
effective date of the Arrangement and (iii) 0.60 (less an amount, based on
the number of dissenting shares, being C$21 per dissenting share up to a
maximum of C$65,000,000). The maximum aggregate number of Avenor
Exchangeable Shares and shares of Bowater Common Stock that may be issued
to holders of Avenor Common Shares will be equal to the product of (i) the
Exchange Ratio, (ii) the number of Avenor Common Shares outstanding on the
effective date of the Arrangement and (iii) 0.50.
As used herein, "Avenor Exchangeable Shares" means shares issued
by Avenor (or at the election of Bowater, a Canadian subsidiary of Bowater)
in connection with the Arrangement. Pursuant to a Voting and Exchange Trust
Agreement, the Trustee thereunder will be the holder of one share of a new
class of special voting stock of Bowater (the "Special Voting Stock") that
will entitle the Trustee to a number of votes on all matters on which
holders of Bowater Common Stock are entitled to vote equal to the number of
Avenor Exchangeable Shares outstanding from time to time. By furnishing
instructions to the Trustee, holders of Avenor Exchangeable Shares will be
able to exercise the same voting rights as they would have after the
exchange of their Avenor Exchangeable Shares for Bowater Common Stock.
Holders of Avenor Exchangeable Shares will also be entitled to receive
dividends equivalent to any dividends paid on Bowater Common Stock.
Holders of Avenor Exchangeable Shares will be entitled at any
time, upon delivery of a certificate representing Avenor Exchangeable
Shares and a duly executed retraction request, to require Avenor (or at the
election of Bowater, a Canadian subsidiary of Bowater) to redeem such
Avenor Exchangeable Shares in exchange for an equivalent number of shares
of Bowater Common Stock, plus all declared and unpaid dividends on such
Avenor Exchangeable Shares. However, Avenor must deliver all such requests
for redemption to Bowater, whereupon Bowater, instead of Avenor, has the
right to purchase the Avenor Exchangeable Shares that are the subject of
the request for redemption in exchange for an equivalent number of shares
of Bowater Common Stock, plus all declared and unpaid dividends on such
Avenor Exchangeable Shares. If this right is not exercised, Avenor is
required to effect the requested redemption. On June 30, 2008
<PAGE>
(the "Automatic Redemption Date") (subject to acceleration in certain
circumstances), Avenor may purchase all outstanding Avenor Exchangeable
Shares in exchange for an equivalent number of shares of Bowater Common
Stock, plus all declared and unpaid dividends on such Avenor Exchangeable
Shares. Bowater has the overriding right, but not the obligation, to
acquire the outstanding Avenor Exchangeable Shares in exchange for an
equivalent number of shares of Bowater Common Stock, plus all declared and
unpaid dividends on such Avenor Exchangeable Shares, on the Automatic
Redemption Date. If Bowater exercises the overriding right, Avenor's
obligation to redeem the Avenor Exchangeable Shares on the Automatic
Redemption Date will terminate.
Avenor has agreed that it will not, directly or indirectly,
through any director, officer, employee, representative or agent, solicit,
initiate or knowingly encourage the initiation of any inquiries or
proposals regarding any Acquisition Proposal (as defined below),
participate in any discussions or negotiations regarding an Acquisition
Proposal, withdraw or modify in a manner adverse to Bowater the approval of
the Board of Directors of Avenor of the transactions contemplated by the
Arrangement Agreement, approve or recommend any Acquisition Proposal or
cause Avenor to enter into any agreement relating to any Acquisition
Proposal; provided however, that subject to Avenor's obligations described
below, nothing will prevent the Board of Directors of Avenor from
considering, negotiating, approving, recommending to its shareholders or
entering into an agreement in respect of an unsolicited bona fide written
Acquisition Proposal that the Board of Directors of Avenor determines in
good faith, after consultation with financial advisors and after receiving
an opinion of outside counsel to the effect that the Board of Directors of
Avenor is required to take such action in order to discharge properly its
fiduciary duties, would, if consummated in accordance with its terms,
result in a transaction more favorable to Avenor's shareholders than the
transactions contemplated by the Arrangement Agreement (any such
Acquisition Proposal being referred to herein as a "Superior Proposal"). As
used herein, "Acquisition Proposal" means any merger, amalgamation,
take-over bid, sale of material assets (or other arrangement having the
same economic effect as a sale), any material sale of shares or rights or
interests therein or thereto or similar transactions involving Avenor or
Bowater or any material subsidiaries of Avenor or Bowater, or a proposal to
effect such a transaction, excluding the Arrangement and the transactions
permitted in Avenor's covenants under the Arrangement Agreement.
Bowater has agreed that it will not, directly or indirectly,
through any officer, director, employee, representative or agent of Bowater
or any of its subsidiaries, solicit, initiate or knowingly encourage the
initiation of any inquiries or proposals regarding an Acquisition Proposal;
provided however, nothing will prevent the Board of Directors of Bowater
from considering, negotiating, approving, recommending to its shareholders
or entering into an agreement in respect of an unsolicited bona fide
written Acquisition Proposal if the Board of Directors of Bowater
determines in good faith, after consultation with its financial advisors
and after receiving an opinion from outside counsel, that it is required to
do so in order to discharge properly its fiduciary duties.
Avenor has agreed that it will not accept, approve, recommend or
enter into any agreement in respect of an Acquisition Proposal (other than
a confidentiality agreement) on the basis that it would constitute a
Superior Proposal until five business days have elapsed from the date it
has provided Bowater with a copy of the Acquisition Proposal. During the
five business day period, Bowater will have the opportunity to offer to
amend the terms of the Arrangement Agreement or the Arrangement. The Board
of Directors of Avenor will review any such offer in good faith to
determine, in its discretion in the exercise of its fiduciary duties,
whether Bowater's amended offer, upon acceptance by Avenor, would result in
the Acquisition Proposal not being a Superior Proposal. If the Board of
Directors of Avenor so determines, it will enter into an amended agreement
with Bowater. Otherwise, it will pay Bowater the break-up fee described
below.
If the shareholders of Bowater do not approve the issuance of
stock and other transactions contemplated by the Arrangement Agreement at
the meeting of the Bowater stockholders to vote on such matter, then
Bowater must pay Avenor C$70 million, provided, however, that the Avenor
shareholders have not disapproved the Arrangement and the Arrangement
Agreement.
If (i) the Board of Directors of Avenor has withdrawn or modified
in a manner adverse to Bowater its approval or recommendation of the
Arrangement, or approved or recommended any Superior Proposal, or
determined that any Acquisition Proposal is a Superior Proposal, or
resolved to take any such action, or (ii) an Acquisition Proposal has been
made known to Avenor or has been made directly to the Avenor
<PAGE>
shareholders or any person has publicly announced an intention to make an
Acquisition Proposal and after such Acquisition Proposal has been made
known, made or announced (a) the Avenor shareholders do not approve the
Arrangement at the Avenor shareholders meeting or (b) the Arrangement is
not, prior to September 30, 1998, submitted for the shareholders' approval,
then Avenor must pay Bowater C$70 million, provided, however, that in the
case of clause (ii), the Bowater stockholders have not disapproved the
issuance of stock and other transactions contemplated by the Arrangement
Agreement.
Consummation of the Arrangement is subject to customary
conditions precedent, including the approval of the Arrangement by the
Ontario Court of Justice, approval by the shareholders of Avenor and
Bowater, receipt of all requisite regulatory approvals (including under the
Hart-Scott-Rodino Antitrust Improvements Act, the Competition Act (Canada)
and the Investment Canada Act) and accuracy of representations and
warranties.
The Arrangement Agreement may be terminated at any time prior to
the effective time of the Arrangement by mutual written consent of Avenor
and Bowater, or by either Avenor or Bowater if the conditions to the
Arrangement have not been waived or satisfied on or before September 30,
1998. In addition, either Bowater or Avenor may terminate the Arrangement
Agreement if an event occurs that causes the other party to be obligated to
pay a break-up fee as described above. Avenor may also terminate the
Arrangement Agreement upon any determination by Avenor that an Acquisition
Proposal constitutes a Superior Proposal, subject to its obligation to pay
a break-up fee as described above.
Prior to its execution, the Arrangement Agreement was approved by
the respective Boards of Directors of Bowater and Avenor. Fairness opinions
were delivered by TD Securities Inc. and Goldman, Sachs & Co. to the Board
of Directors of Bowater and by RBC Dominion Securities Inc. to the Board of
Directors of Avenor.
A copy of the press release issued by Bowater and Avenor on March
9, 1998 with respect to the Arrangement Agreement is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Description
99.1 Press Release dated March 9, 1998, announcing the execution
of the Arrangement Agreement between Avenor Inc. and Bowater
Incorporated
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Bowater Incorporated
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(Registrant)
Date: March 19, 1998 By : /s/ David G. Maffucci
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(Signature)
Name: David G. Maffucci
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit Description
99.1 Press Release dated March 9, 1998, announcing the execution
of the Arrangement Agreement between Avenor Inc. and Bowater
Incorporated
<PAGE>
Exhibit 99.1
[Bowater Logo] Bowater Incorporated
Deborah L. Humphrey
Director of Corporate Communications
55 East Camperdown Way
Post Office Box 1028
Greenville, SC 29602-1028
Phone: 864/282-9571
Fax: 864/282-9564
For Additional Information Contact:
CONTACTS:
Investors: Media:
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James H. Dorton Deborah L. Humphrey
Vice President and Treasurer Director of Corporate Communications
Bowater Incorporated Bowater Incorporated
864/282-9500 864/282-9571
Francois R. Roy Sandra Harwood
EVP and Chief Financial Officer Corporate Director, Corporate
Avenor Inc. Communications
514/846-5122 Avenor Inc.
514/846-6041
FOR IMMEDIATE RELEASE
MONDAY, MARCH 9, 1998
BOWATER TO COMBINE WITH AVENOR
Greenville, South Carolina, and Montreal, Quebec, March 9, 1998 - Bowater
Incorporated (NYSE:BOW) and Avenor Inc. (TSE and ME:AVR, NYSE:ANR) today
announced the signing of a definitive agreement by which Bowater will
acquire all of the outstanding shares of Avenor for C$35.00 (U.S.$24.67)
per share, or approximately C$3.5 billion (U.S.$2.47 billion) including
assumed debt. The combination has been approved by the boards of directors
of both companies.
Avenor shareholders may choose to receive cash, common shares of
Bowater or Canadian-listed shares in a new Bowater Canadian subsidiary,
with the same voting and dividend rights, which are exchangeable at any
time into Bowater shares. Of the total purchase price, a maximum of 60
percent will be payable in cash and 40 percent will be payable in stock,
subject to proration, except that up to 50 percent will be payable in stock
if the holders of more than 40 percent of the Avenor shares opt for the
stock alternative. The exchange ratio for the share component of the
purchase price will be maintained at the C$35.00 (U.S.$24.67) price per
share unless the Bowater share price exceeds U.S. $55.62 or falls below
U.S.$45.57 prior to closing, under either of which circumstance the
exchange ratio will be fixed at those limits.
Arnold M. Nemirow, Bowater's Chairman, President and Chief
Executive Officer, said: "I am extremely enthusiastic about the significant
and compelling opportunities this transaction will offer to our respective
shareholders, employees and customers. The combination of these two market
leaders creates a premier North American forest products company. Eight
well maintained newsprint mills in North America, backed by experienced
management teams, enhance the company's ability to service all major
newsprint markets. Well positioned export mills also will accelerate
Bowater's strategy for growth in
<PAGE>
Latin America, Europe and Asia. With one of the lowest cost mill structures
and delivery systems in the industry, the expanded company is capable of
generating additional shareholder value. We are pleased to increase our
commitment in Canada, where we own a newsprint mill in Liverpool, Nova
Scotia, as well as 613,000 acres of forest land, and by joining with a
Quebec-based company with a well-deserved reputation for excellence in our
industry."
Bowater anticipates that the combination will be immediately
accretive to earnings and cash flow. In addition to C$50 million (U.S.$35
million) in remaining cost savings previously identified by Avenor under
its Operational Excellence program, new cost savings and operating
synergies of approximately C$105 million (U.S.$75 million) are expected to
be readily achievable.
Bowater will fund the cash portion of the transaction with
existing funds and committed bank financing. In addition, following the
completion of the transaction, the company intends to sell the uncoated
freesheet mill and pulp mill in Dryden, Ontario, with the proceeds used to
repay debt. The projected substantial cash flow will ensure that the
company's post-transaction debt structure and capitalization will remain
strong.
Through the combination, Bowater will double its annual newsprint
and groundwood capacity to approximately 3 million metric tonnes and become
a major producer of market pulp with annual production capacity in excess
of 1 million metric tonnes. The company will be the second largest producer
of newsprint in the world and the third largest producer of market pulp in
North America.
Arthur R. Sawchuk, Avenor's President and Chief Executive
Officer, said: "Avenor's board of directors, after careful review, has
concluded that the transaction we are announcing today is clearly superior
to a number of other alternatives available to Avenor, and we recommend
that Avenor shareholders vote in favor of the transaction. The combination
with Bowater provides Avenor shareholders with significantly more immediate
and long-term value than that contained in other alternatives. We believe
that the combination of Avenor and Bowater provides the strength to compete
into the new millennium. We are delighted that our shareholders, customers
and employees will participate in Bowater's success."
<PAGE>
The definitive agreement provides for mutual termination fees of
C$70 million (U.S.$49.4 million), and Avenor has agreed not to solicit or
encourage any competing offers. The transaction must be approved by the
shareholders of both companies and appropriate regulatory authorities. It
is expected that shareholder meeting materials will be mailed to
shareholders of both companies by the end of May and that the transaction
will be completed by the end of June 1998.
Bowater Incorporated, headquartered in Greenville, S.C., is the
largest producer of newsprint in the United States, and also makes coated
and uncoated groundwood papers, bleached kraft pulp and lumber products. It
has five paper mills and 3.5 million acres of timberlands in the United
States 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.
Avenor Inc. is an international forest products company which
manufactures newsprint, pulp, white paper, and wood products. The Company
is one of North America's largest suppliers of post-consumer
recycled-content newsprint, one of Canada's leading exporters of market
pulp, and one of the largest suppliers of white paper (uncoated freesheet)
to the Canadian market. Exports to the United States and to other key
markets around the world accounted for 80 percent of its total net sales in
1997.
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