Abitibi-Consolidated, Donohue to Merge

Abitibi-Consolidated Inc. agreed to buy Donohue Inc. for $4.9 billion to create a company with about a third of North America’s newsprint market.

The companies are combining to control production and as the strength of the U.S. dollar erodes profitability. While most paper grades, such as magazine paper, have seen prices rise as economies expand worldwide, newsprint prices have slipped to five-year lows because of overcapacity in the U.S.

The new company will be the fifth-largest lumber producer in North America, with 19 sawmills and stakes in five others with a combined capacity of 2.2 billion board feet.

It will have 25 paper mills in Canada, the U.S. and the U.K. as well as a one-third interest in four mills in South Korea, Thailand and China, providing the company with a newsprint production capacity of 6.3 million tons. Groundwood capacity will be 1.7 million tons and the company will have 444,000 tons of high- quality, low-cost market pulp.