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RISI Economists Forecast Abitibi-Bowater Merger to Weaken Newsprint Market in 2007

Press release from the issuing company

BOSTON, Mass., Feb. 5, 2007 - RISI economists today responded to the recent news of the Abitibi-Bowater merger, stating their expectation that the North American newsprint market will remain very weak for most of 2007. Abitibi and Bowater commanded a 40% combined share of the North American domestic market in 2006. The proposed merger is based on the continued operation of existing assets with no further capacity closures. "The inability to reduce capacity will prevent the two companies from playing a leadership role in arresting the deteriorating supply/demand balance in 2007," said Kevin Conley, RISI's sr. economist for newsprint. "In addition, it increases the possibility that other producers' highest-cost newsprint mills that have benefited from Abitibi-Consolidated's and Bowater's past efforts to balance the market, will not survive." Conley continued, "Consolidation of the North American newsprint industry will prove to have a positive impact, creating a leaner, more-efficient manufacturing platform over the long term and the merger of Abitibi-Consolidated and Bowater is another step in that direction. However, any short-term benefits will remain unrealized as the North American market balance deteriorates and profitability for newsprint producers remains elusive in 2007." Background: On January 29 Abitibi-Consolidated and Bowater announced plans to merge the two companies in an all-stock deal to form AbitibiBowater with headquarters based in Montreal. Pending shareholder and regulatory approval, the merger will create the third largest publicly traded paper and forest products company in North America and the eighth largest in the world. The union will also lift the new company to the position of largest global producer of newsprint, commanding 15% of global newsprint capacity, with Norske Skog slipping to second place. Information on RISI's suite of business intelligence for newsprint markets is located at www.risiinfo.com/newsprint.