Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Relief from requirement to include certain information in a joint information circular in connection with a plan of arrangement for a cross-border transaction.

Applicable Statutory Provisions

National Instrument 51-102 - Continuous Disclosure Obligations.

Translation

June 8, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUEBEC ACTING AS PRINCIPAL REGULATOR

UNDER MI 11-101 AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

BOWATER INCORPORATED (Bowater),

BOWATER CANADA INC. (Bowater Canada),

ABITIBI-CONSOLIDATED INC. (Abitibi) and

ABITIBIBOWATER INC. (AbitibiBowater)

(collectively, the Filers)

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) that they be exempt from the following requirements in connection with the joint proxy statement/prospectus/management information circular (the Circular) prepared in connection with the proposed combination of Bowater and Abitibi pursuant to a combination agreement and agreement and plan of merger dated January 29, 2007, as amended on May 7, 2007 (the Combination Agreement) among Abitibi, Bowater, AbitibiBowater, Alpha-Bravo Merger Sub Inc. (Merger Sub) and Bowater Canada (the Proposed Transaction):

(a) the requirement to include in the Circular the information relating to Bowater Canada that is required to be included in a prospectus; and

(b) the requirement to include in the Circular a compilation report that would otherwise be required to accompany the unaudited pro forma Financial Statements of AbitibiBowater assuming and giving effect to the Proposed Transaction (the Pro forma Financial Statements);

(collectively, the Requested Relief).

Application of Principal Regulator System

Under Multilateral Instrument 11-101 -- Principal Regulator System (MI 11-101) and the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Autorité des marchés financiers (the AMF) is the principal regulator for the Filers;

(b) the Filers are relying on the exemption in Part 3 of MI 11-101 in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (the Provinces) with regard to Bowater Canada and in the Provinces, Yukon, the Northwest Territories and Nunavut with regard to Abitibi; and

(c) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions have the same meanings in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filers:

The Proposed Transaction

1. The Proposed Transaction would, subject to the receipt of all applicable shareholder, regulatory and court approvals, and the satisfaction or waiver of all closing conditions set forth in the Combination Agreement, effect a combination of Bowater with Abitibi by way of a plan of arrangement (the Arrangement) under section 192 of the Canada Business Corporations Act (the CBCA) with regard to Abitibi, and by way of the merger of Merger Sub with and into Bowater (the Merger) under Delaware law with regard to Bowater. Upon consummation of the Proposed Transaction, AbitibiBowater will emerge as a new corporation whose equity securities will be listed and traded on both the New York Stock Exchange (the NYSE) and the Toronto Stock Exchange (the TSX) and will combine the businesses and operations currently carried on, on a stand-alone basis, by Abitibi and Bowater.

2. Upon the completion of the Proposed Transaction, each of Abitibi and Bowater will become wholly-owned direct or indirect subsidiaries of AbitibiBowater. More specifically, upon completion of the Proposed Transaction: (i) Bowater common stockholders will receive 0.52 of a share of AbitibiBowater common stock (the AbitibiBowater Common Stock) for each share of Bowater common stock (the Bowater Common Stock) they own immediately prior to the Merger; and (ii) Abitibi shareholders will receive 0.06261 of a share of AbitibiBowater Common Stock for each common share of Abitibi (an Abitibi Common Share) they own immediately prior to the Arrangement, other than shares subject to a properly made election to receive non-voting exchangeable shares of Bowater Canada (the Bowater Canada Exchangeable Shares), which will become exchangeable for shares of AbitibiBowater Common Stock, and 0.06261 of a Bowater Canada Exchangeable Share for each Abitibi Common Share subject to a properly made election, or a combination of shares of AbitibiBowater Common Stock and Bowater Canada Exchangeable Shares. The first amendment to the Combination Agreement entered into on May 7, 2007 (the First Amendment) provides for a limit on the number of Bowater Canada Exchangeable Shares that Bowater Canada will issue to eligible Abitibi shareholders.

3. The Proposed Transaction and the Combination Agreement also contemplate that, concurrently with the Arrangement and the Merger, Bowater Canada will amend its articles in connection with, and in order to give effect to, the Proposed Transaction (the Bowater Canada Articles of Amendment). The Bowater Canada Articles of Amendment consist of the following three (3) elements:

(i) Bowater Canada's name will be changed to "AbitibiBowater Canada Inc.";

(ii) each issued and outstanding Bowater Canada Exchangeable Share will be changed into 0.52 of a Bowater Canada Exchangeable Share, which is the same exchange ratio at which the stockholders of Bowater would exchange their shares of Bowater Common Stock for shares of AbitibiBowater Common Stock pursuant to the Merger; and

(iii) the rights, privileges, restrictions and conditions attaching to the Bowater Canada Exchangeable Shares (the Bowater Canada Exchangeable Share Provisions) will be repealed and replaced with a new set of Bowater Canada Exchangeable Share Provisions. The principal amendments to the Bowater Canada Exchangeable Share Provisions consist of: (A) extending the date prior to which the directors of Bowater Canada may not, unless there are fewer than 500,000 Bowater Canada Exchangeable Shares outstanding or there is a proposed change-in-control transaction with respect to AbitibiBowater, cause the redemption of the Bowater Canada Exchangeable Shares, from June 30, 2008 to June 30, 2018; (B) clarifying that the Bowater Canada Exchangeable Shares will become exchangeable for shares of AbitibiBowater Common Stock, instead of being exchangeable for shares of Bowater Common Stock; and (C) other conforming changes required to give effect to the Proposed Transaction.

4. As a result of the foregoing, immediately following the completion of the Proposed Transaction, it is estimated that Bowater's former stockholders (including holders of Bowater Canada Exchangeable Shares) will hold approximately 52% and Abitibi's former shareholders will hold approximately 48%, of the outstanding equity interests and voting rights of AbitibiBowater Common Stock.

5. The Merger requires the approval of the stockholders of Bowater (including holders of Bowater Canada Exchangeable Shares), the Arrangement requires the approval of the shareholders of Abitibi and the Bowater Canada Articles of Amendment require the approval of the shareholders of Bowater Canada.

6. The holders of Bowater Common Stock and the special voting stock issued by Bowater (the Special Voting Stock) will be asked to approve the Combination Agreement and the Merger at Bowater's annual meeting of stockholders that is currently anticipated to be held on or about July 18, 2007 (the Bowater Meeting). Holders of Bowater Canada Exchangeable Shares will be asked to approve the Combination Agreement and Merger at the Bowater Meeting by instructing a trustee pursuant to a voting and exchange trust agreement how to vote at the Bowater Meeting. The approval of the Combination Agreement and the Merger will require the affirmative vote of a majority of the total voting power of all outstanding shares of Bowater Common Stock and the Special Voting Stock entitled to vote at the Bowater Meeting. The holders of Bowater Common Stock and the trustee holding the Special Voting Stock (acting for the holders of Bowater Canada Exchangeable Shares) will vote together as a single class on all matters.

7. The holders of both Bowater Canada Exchangeable Shares and Bowater Canada Common Shares will be asked to approve a special resolution authorizing the adoption of the Bowater Canada Articles of Amendment (the Bowater Canada Shareholders' Resolution) at the special meeting of the shareholders of Bowater Canada that is currently anticipated to be held on or about July 17, 2007 (the Bowater Canada Meeting). The approval of the Bowater Canada Articles of Amendment will require the affirmative vote of: (i) 66 2/3% of the votes cast at the Bowater Canada Meeting on the Bowater Canada Shareholders' Resolution by holders of the Bowater Canada Common Shares and the Bowater Canada Exchangeable Shares voting together as a single class, present at the Bowater Canada Meeting in person or represented by proxy; and (ii) 66 2/3% of the votes cast at the Bowater Canada Meeting on the Bowater Canada Shareholders' Resolution by holders of the Bowater Canada Exchangeable Shares voting as a separate class, present at the Bowater Canada Meeting in person or represented by proxy.

8. The holders of Abitibi Common Shares will be asked to approve a special resolution authorizing the Arrangement (the Abitibi Shareholders' Resolution) at the special meeting of the shareholders of Abitibi, which is currently anticipated to be held on or about July 18, 2007 (the Abitibi Meeting). The approval of the Arrangement will require the affirmative vote of not less than 66 2/3% of the votes cast on the Abitibi Shareholders' Resolution by the holders of Abitibi Common Shares present at the Abitibi Meeting in person or represented by proxy.

9. AbitibiBowater will account for the Proposed Transaction using the purchase method of accounting under generally accepted accounting principles in the United States of America (U.S. GAAP). Although the combination of Abitibi and Bowater has been structured as a "merger of equals transaction", U.S. GAAP require that one of the two companies party to the transaction be designated as the "acquiror" solely for accounting purposes. Based on a review of the applicable accounting rules, Abitibi and Bowater have preliminarily determined that Bowater is the "acquiror" solely for accounting purposes. The purchase price will be allocated to Abitibi's identifiable assets and liabilities based on their estimated fair market values on the second business day after the date on which all closing conditions to the Proposed Transaction have been satisfied or waived or another time as agreed to in writing by the parties, and any excess of the purchase price over those fair market values will be accounted for as goodwill. After completion of the Proposed Transaction, the results of operations of Abitibi will, on a going-forward basis, be included in the consolidated financial statements of AbitibiBowater, which will also include the results of operations of Bowater and will be prepared in accordance with U.S. GAAP.

Bowater

10. Bowater was incorporated under the laws of the State of Delaware in 1964.

11. The principal executive offices of Bowater are located at 55 East Camperdown Way, Greenville, South Carolina, United States of America 29601.

12. Bowater is a leading producer of newsprint, coated and uncoated mechanical papers, bleached kraft pulp and lumber products.

13. The authorized capital stock of Bowater consists of 100,000,000 shares of Bowater Common Stock, par value US$1.00 per share and 10,000,000 shares of serial preferred stock (the Bowater Serial Preferred Stock), par value US$1.00 per share, of which there were, as of April 30, 2007, 56,217,139 issued and outstanding shares of Bowater Common Stock and one (1) issued and outstanding share of Bowater Serial Preferred Stock; Bowater has issued one share of special voting stock (designated as such from among the Bowater Serial Preferred Stock pursuant to a certificate of designation) to a trustee for the benefit of the holders of the Bowater Canada Exchangeable Shares (other than Bowater and its affiliates).

14. Bowater is a reporting issuer in the Province of Québec and is not on the list of defaulting reporting issuers maintained under the Securities Act (Québec).

15. Bowater is an "SEC issuer" as such term is defined in National Instrument 51-102 -- Continuous Disclosure Obligations (NI 51-102) and the shares of Bowater Common Stock are currently listed on the NYSE under the symbol "BOW".

16. Immediately upon completion of the Proposed Transaction, Bowater will become a wholly-owned subsidiary of AbitibiBowater and it is intended that, shortly thereafter, application will be made for Bowater to cease to be a reporting issuer in the Province of Québec and for the shares of Bowater Common Stock to be delisted from the NYSE.

Bowater Canada

General

17. Bowater Canada was incorporated under the CBCA on April 15, 1998.

18. Bowater Canadian Holdings Inc. (Bowater Canadian Holdings), a direct wholly-owned subsidiary of Bowater, owns all of the issued and outstanding common shares of Bowater Canada. Bowater Canada is thus an indirect subsidiary of Bowater.

19. Bowater Canada's registered office is located at 1 First Canadian Place, 41st Floor, 100 King Street West, Toronto, Ontario, Canada M5X 1B2.

20. Bowater Canada has no real operations and its sole material assets consist of the shares of the capital of Bowater Canadian Forest Products Inc.

Bowater Canada's Share Capital

21. The authorized share capital of Bowater Canada consists of an unlimited number of common shares (the Bowater Canada Common Shares), 1,000 preferred shares (the Bowater Canada Preferred Shares) and an unlimited number of Bowater Canada Exchangeable Shares, of which, as at April 30, 2007, there were issued and outstanding 86,844,900 Bowater Canada Common Shares, no Bowater Canada Preferred Shares and 5,989,385 Bowater Canada Exchangeable Shares. Bowater Canadian Holdings owns all of the issued and outstanding Bowater Canada Common Shares and 4,786,647 of the issued and outstanding Bowater Canada Exchangeable Shares.

22. The Bowater Canada Exchangeable Share Provisions provide inter alia, that the holders of Bowater Canada Exchangeable Shares are entitled, at any time, to require Bowater Canada to redeem any or all of the Bowater Canada Exchangeable Shares and confer upon Bowater Canadian Holdings a pre-emptive "call right" to purchase all but not less than all of the Bowater Canada Exchangeable Shares that are the subject of such proposed redemption.

23. Bowater Canada is a reporting issuer (or has equivalent status) in each of the Provinces.

24. Bowater Canada Exchangeable Shares are currently listed on the TSX under the symbol "BWX". Bowater Canada intends to apply for the listing of additional Bowater Canada Exchangeable Shares issuable in connection with the Proposed Transaction on the TSX and to change its stock symbol to "AXB" (reflecting its proposed change of name to "AbitibiBowater Canada Inc.").

Bowater Canada Exchangeable Share Documents

Bowater Canada Exchangeable Share Provisions

25. The current Bowater Canada Exchangeable Share Provisions provide, among other matters, that: (a) the Bowater Canada Exchangeable Shares are exchangeable for shares of Bowater Common Stock; and (b) except as required by applicable law, the holders of Bowater Canada Exchangeable Shares are not entitled to vote at meetings of the shareholders of Bowater Canada.

Voting and Exchange Trust Agreement and Support Agreement

26. Pursuant to and in connection with a voting and exchange trust agreement among Bowater Canada, Bowater Canadian Holdings, Bowater and Montreal Trust Company of Canada (now Computershare Trust Company of Canada) (the Trustee) dated July 24, 1998 (the Voting and Exchange Trust Agreement) and a support agreement among Bowater Canada, Bowater Canadian Holdings and Bowater dated July 24, 1998 (the Support Agreement), holders of Bowater Canada Exchangeable Shares are provided with economic entitlements and voting rights that are substantially the equivalent of the economic entitlements and voting rights attaching to the shares of Bowater Common Stock. At each meeting of the stockholders of Bowater, the Special Voting Stock issued by Bowater to the Trustee carries a number of votes equal to the number of then issued and outstanding Bowater Canada Exchangeable Shares (other than Bowater Canada Exchangeable Shares held by Bowater and its affiliates) for which the Trustee has received timely voting instructions from the holders of Bowater Canada Exchangeable Shares.

27. Bowater, Bowater Canadian Holdings and Bowater Canada will not exercise, and will prevent their affiliates from exercising, any voting rights attached to the Bowater Canada Exchangeable Shares owned by Bowater or Bowater Canadian Holdings or their affiliates on any matter considered at meetings of holders of Bowater Canada Exchangeable Shares (including any approval sought from such holders in respect of matters arising under the Support Agreement).

Abitibi

28. Abitibi results from the amalgamation of Abitibi-Price Inc. and Stone-Consolidated Corporation under the CBCA, pursuant to a certificate and articles of amalgamation each dated May 30, 1997.

29. Abitibi's principal executive and registered office is located at 1155 Metcalfe Street, Suite 800, Montréal, Québec, Canada H3B 5H2.

30. Abitibi is a global leader in newsprint and uncoated groundwood (commercial printing) papers as well as a major producer of wood products serving clients in some 70 countries from its 45 operating facilities.

31. Abitibi's authorized share capital consists of an unlimited number of Abitibi Common Shares and an unlimited number of Class A preferred shares (the Abitibi Preferred Shares), issuable in series. As at April 30, 2007, there were 440,174,994 Abitibi Common Shares and no Abitibi Preferred Shares issued and outstanding.

32. As of April 30, 2007, there were 15,627,867 outstanding options to acquire Abitibi Common Shares (the Abitibi Options) under Abitibi's various equity-based incentive plans.

33. Abitibi is a reporting issuer or has equivalent status in each of the Provinces and Territories and is not on the list of defaulting reporting issuers maintained under the relevant provisions of the Legislation.

34. The Abitibi Common Shares are currently listed on the TSX under the symbol "A" and on the NYSE under the symbol "ABY".

35. Upon completion of the Proposed Transaction, all of Abitibi's Common Shares will be owned by AbitibiBowater and Bowater Canada and it is intended that, shortly thereafter, application will be made for Abitibi to cease to be a reporting issuer and for the Abitibi Common Shares to be delisted from the TSX and the NYSE.

AbitibiBowater

36. Abitibi and Bowater formed AbitibiBowater for the sole purpose of effecting the Proposed Transaction and, to date, AbitibiBowater has not conducted any activities other than those incident to its formation, the execution of the Combination Agreement and the preparation of the Circular.

37. Before the execution of the Combination Agreement, Abitibi and Bowater caused Alpha-Bravo Holdings Inc. (now AbitibiBowater) to be organized under the laws of the State of Delaware. Each of Bowater and Abitibi currently owns 50% of the capital stock of AbitibiBowater which consists of 100 shares of AbitibiBowater Common Stock, par value $.01 per share of which, to date, one (1) share has been issued to Abitibi and one (1) share has been issued to Bowater.

Merger Sub

38. AbitibiBowater formed Merger Sub for the sole purpose of effecting the Proposed Transaction. To date, Merger Sub has not conducted any activities other than those incident to its formation and the execution of the Combination Agreement.

39. Upon completion of the Merger, Merger Sub will merge with and into Bowater with Bowater continuing as the surviving corporation.

The Bowater Canada Exchangeable Share Limit

40. The First Amendment provides for a limit on the number of Bowater Canada Exchangeable Shares that may be issued to eligible Abitibi shareholders in the Proposed Transaction to an amount that, when combined with Bowater Canada Exchangeable Shares issued to current holders of Bowater Canada Exchangeable Shares (after giving effect to the proposed share consolidation of the current Bowater Canada Exchangeable Shares contemplated by the Bowater Canada Articles of Amendment), is less than 20% of the total voting power of AbitibiBowater (the Bowater Canada Exchangeable Share Limit). The Bowater Canada Exchangeable Share Limit was established as a precaution to ensure that the Proposed Transaction remains tax deferred for U.S. resident holders of Abitibi Common Shares.

41. In the event that eligible Abitibi shareholders elect to receive an aggregate number of Bowater Canada Exchangeable Shares that exceeds the Bowater Canada Exchangeable Share Limit, then the number of Bowater Canada Exchangeable Shares that will be issued to each electing eligible Abitibi shareholder will be determined by multiplying the total number of Bowater Canada Exchangeable Shares otherwise issuable to such shareholder by a fraction, the numerator of which is the Bowater Canada Exchangeable Share Limit and the denominator of which is the aggregate number of Bowater Canada Exchangeable Shares otherwise issuable to all eligible Abitibi shareholders that elected to receive Bowater Canada Exchangeable Shares. In these circumstances, AbitibiBowater will issue to each electing eligible Abitibi shareholder a number of shares of AbitibiBowater Common Stock equal to the difference between (i) the number of Bowater Canada Exchangeable Shares otherwise issuable to an electing eligible Abitibi shareholder and (ii) the number of Bowater Canada Exchangeable Shares that will actually be issued to such shareholder.

42. Based on publicly available information regarding the current shareholdings of Abitibi, it is not expected that the Bowater Canada Exchangeable Share Limit will have a material effect on the ability of eligible Abitibi shareholders to receive tax deferred treatment on the exchange of their Abitibi Common Shares under the Proposed Transaction should they so elect.

The Bowater Canada Articles of Amendment

43. After the consummation of the Proposed Transaction, each Bowater Canada Exchangeable Share will be substantially the economic equivalent of one share of AbitibiBowater Common Stock and will be exchangeable at any time on a one-for-one basis for shares of AbitibiBowater Common Stock. In addition, each holder of a Bowater Canada Exchangeable Share will receive certain ancillary rights, including the right, through the Voting and Exchange Trust Agreement and the Special Voting Stock to: (i) effectively have the ability to cast votes at all AbitibiBowater stockholder meetings along with holders of shares of AbitibiBowater Common Stock; and (ii) economically equivalent entitlements to those held by holders of AbitibiBowater Common Stock pursuant to the Bowater Canada Exchangeable Share Provisions and the Support Agreement.

Amendments to the Voting and Exchange Trust Agreement and Support Agreement

44. Pursuant to the Combination Agreement, Bowater has agreed and undertaken that it will, and it will cause Bowater Canadian Holdings and Bowater Canada, on or prior to the Effective Date and subject to obtaining the final order of the Superior Court of Québec (the Court) approving the Arrangement (the Final Order) to, amend or amend and restate each of the Voting and Exchange Trust Agreement and the Support Agreement in order to give effect to the Proposed Transaction, including the Bowater Canada Articles of Amendment. Furthermore, subject to obtaining the Final Order and on or prior to the Effective Date, AbitibiBowater has agreed and undertaken to become a party to the amended and restated Voting and Exchange Trust Agreement and Support Agreement in order to assume the obligations of Bowater arising from the two agreements.

Court Approval of the Arrangement

45. Abitibi will apply to the Court for an interim order (the Interim Order) pursuant to section 192 of the CBCA which will require that the Arrangement be approved by the shareholders of Abitibi. The Interim Order is expected to provide for the convening and holding of the Abitibi Meeting in order for the holders of Abitibi Common Shares to vote on the Arrangement.

46. It is also a condition to the closing of the Proposed Transaction that the Final Order be granted.

47. Upon completion of the Proposed Transaction, each share of AbitibiBowater Common Stock that is owned by Bowater and Abitibi will automatically be cancelled.

Stock Exchange Listings

48. Pursuant to the Combination Agreement, Abitibi and Bowater have agreed to use their respective commercially reasonable efforts to:

(i) cause the shares of AbitibiBowater Common Stock to be issued pursuant to the Proposed Transaction to be approved for listing on the NYSE and the TSX before the completion of the Proposed Transaction, subject to official notice of issuance;

(ii) cause the shares of AbitibiBowater Common Stock to be issued upon exchange of the Bowater Canada Exchangeable Shares and upon exercise of replacement options to purchase AbitibiBowater Common Stock to be approved for listing on the NYSE and the TSX before completion of the Proposed Transaction, subject to official notice of issuance; and

(iii) cause the additional Bowater Canada Exchangeable Shares to be issued to holders of Abititi Common Shares who validly elect to receive Bowater Canada Exchangeable Shares in the Arrangement to be conditionally approved for listing on the TSX before the completion of the Proposed Transaction.

49. Following completion of the Proposed Transaction, the AbitibiBowater Common Stock is expected to trade on both the NYSE and the TSX under the symbol "ABH," while the Bowater Canada Exchangeable Shares are expected to trade on the TSX under the symbol "AXB".

AbitibiBowater Upon the Completion of the Proposed Transaction

50. In accordance with AbitibiBowater's restated certificate of incorporation, restated bylaws and certificate of designation with respect to AbitibiBowater special voting stock (the AbitibiBowater Special Voting Stock), each of which will be in effect on the Effective Date, AbitibiBowater will be authorized to issue 100,000,000 shares of AbitibiBowater Common Stock, par value U.S.$1.00 per share, and 10,000,000 shares of serial preferred stock (AbitibiBowater Serial Preferred Stock), par value U.S.$1.00 per share. A number of shares of AbitibiBowater Common Stock equal to the number of Bowater Canada Exchangeable Shares outstanding after the completion of the Proposed Transaction will be reserved for issuance upon the exchange of Bowater Canada Exchangeable Shares and a certain number of shares of AbitibiBowater Common Stock will be reserved for issuance upon the exercise from time to time of stock options and other stock-based awards.

51. The certificate of designation with respect to AbitibiBowater Special Voting Stock will create a series of preferred stock designated as "Special Voting Stock", which will consist of one share and will have the rights, privileges, restrictions and conditions described in the certificate of designation. At each annual or special meeting of AbitibiBowater stockholders, the Trustee in its capacity as holder of the AbitibiBowater Special Voting Stock will be entitled to vote on all matters submitted to a vote of the holders of AbitibiBowater Common Stock, voting together with the holders of AbitibiBowater Common Stock as a single class (except as otherwise provided by applicable law or in the certificate of designations with respect to the AbitibiBowater Special Voting Stock). The Trustee holding the AbitibiBowater Special Voting Stock will be entitled to cast on any such matter a number of votes equal to the number of then outstanding Bowater Canada Exchangeable Shares that are not owned by AbitibiBowater or its affiliates, and as to which the Trustee holding the AbitibiBowater Special Voting Stock has received timely voting instructions from the holders of such Bowater Canada Exchangeable Shares. The Voting and Exchange Trust Agreement, which will be amended and restated prior to the Effective Date, will further set forth the procedures and rights relating to the AbitibiBowater Special Voting Stock.

52. Upon completion of the Proposed Transaction, AbitibiBowater will be a reporting issuer (or have equivalent status) in each of the Provinces and Territories.

The Circular

53. In connection with the Bowater Meeting, the Bowater Canada Meeting and the Abitibi Meeting, each of Bowater, Bowater Canada and Abitibi will deliver the Circular to their respective shareholders. The Circular will contain prospectus-level disclosure of the business and affairs of Bowater, Abitibi and AbitibiBowater, as well as the particulars of the Proposed Transaction, including details of the Combination Agreement, the Merger, the Arrangement and the Bowater Canada Articles of Amendment.

54. All required and relevant historical audited or unaudited financial information regarding Bowater, Abitibi and AbitibiBowater as well as the Pro forma Financial Statements will be included in or incorporated by reference into the Circular.

55. Abitibi's annual and interim financial statements are prepared in accordance with Canadian generally accepted accounting principles.

56. Bowater's annual and interim financial statements are prepared in accordance with U.S. GAAP.

57. AbitibiBowater's historical financial statements included in the Circular, which consist solely of an audited consolidated "opening" balance sheet, have been prepared in accordance with U.S. GAAP.

58. The Pro forma Financial Statements have been prepared in accordance with U.S. GAAP.

59. The following financial statements and related management's discussion and analysis will be incorporated by reference into the Circular:

(i) Bowater's audited comparative consolidated financial statements for each of the years in the three-year period ended December 31, 2006 and management's discussion and analysis thereon included in Bowater's Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 1, 2007;

(ii) Bowater's interim unaudited financial statements for the three-month period ended March 31, 2007 and management's discussion and analysis thereon included in Bowater's quarterly report on Form 10-Q for the three-month period ended March 31, 2007 filed with the SEC on May 10, 2007;

(iii) Abitibi's audited comparative consolidated financial statements for the fiscal years ended December 31, 2006, December 31, 2005 and December 31, 2004 and management's discussion and analysis thereon filed with the Canadian securities regulatory authorities on March 15, 2007; and

(iv) Abitibi's interim unaudited financial statements for the three-month period ended March 31, 2007 and management's discussion and analysis thereon filed with the Canadian securities regulatory authorities on May 9, 2007.

60. The following financial statements will be included in the Circular:

(i) AbitibiBowater's audited consolidated balance sheet as at March 31, 2007; and

(ii) the Pro forma Financial Statements.

Prospectus-Level Disclosure Regarding Bowater Canada

61. Upon completion of the Proposed Transaction, Bowater Canada will be an indirect subsidiary of AbitibiBowater, wholly-owned except for the Bowater Canada Exchangeable Shares held by members of the public.

62. The Bowater Canada Exchangeable Shares currently provide a holder with a security in a Canadian issuer, namely Bowater Canada, having economic and voting rights which are, as nearly as practicable, identical to those of shares of Bowater Common Stock. In particular, each Bowater Canada Exchangeable Share is: (a) entitled to receive dividends from Bowater Canada in amounts which are economically equivalent to, and which are payable immediately after, the dividends declared on a share of Bowater Common Stock; (b) entitled to be redeemed at any time, at the holder's option, for a share of Bowater Common Stock; (c) entitled on the liquidation, dissolution or winding-up of Bowater Canada to be exchanged for one share of Bowater Common Stock; (d) upon the liquidation, dissolution or winding-up of Bowater, automatically exchanged for one share of Bowater Common Stock so that the holder thereof may participate in the dissolution of Bowater on the same basis as a holder of a share of Bowater Common Stock; and (e) entitled to vote, on an equivalent basis through the Voting and Exchange Trust Agreement, at all Bowater stockholder meetings and with respect to all written consents sought by Bowater from holders of shares of Bowater Common Stock.

63. In the event the Proposed Transaction is completed, the Bowater Canada Exchangeable Shares will provide a holder with a security in a Canadian issuer, namely Bowater Canada, which will be renamed AbitibiBowater Canada Inc. (AbitibiBowater Canada), having economic and voting rights which will be, as nearly as practicable, identical to those of shares of AbitibiBowater Common Stock. In particular, each exchangeable share of the capital of AbitibiBowater Canada (the AbitibiBowater Canada Exchangeable Share) will be: (a) entitled to receive dividends from AbitibiBowater Canada in amounts which are economically equivalent to, and which are payable immediately after the dividends declared on a share of AbitibiBowater Common Stock; (b) entitled to be redeemed at any time, at the holder's option, for a share of AbitibiBowater Common Stock; (c) entitled on the liquidation, dissolution or winding-up of AbitibiBowater Canada to be exchanged for one share of AbitibiBowater Common Stock; (d) upon the liquidation, dissolution or winding-up of AbitibiBowater, automatically exchanged for one share of AbitibiBowater Common Stock so that the holder thereof may participate in the dissolution of AbitibiBowater on the same basis as a holder of a share of AbitibiBowater Common Stock; and (e) entitled to vote, on an equivalent basis through the amended and restated Voting and Exchange Trust Agreement, at all AbitibiBowater stockholder meetings and with respect to all written consents sought by AbitibiBowater from holders of shares of AbitibiBowater Common Stock.

64. As a result of this substantial economic and voting equivalency between the AbitibiBowater Canada Exchangeable Shares and shares of AbitibiBowater Common Stock, holders of AbitibiBowater Canada Exchangeable Shares will have a participating interest determined by reference to AbitibiBowater, rather than AbitibiBowater Canada, and dividend and liquidation entitlements will be determined by reference to the financial performance and condition of AbitibiBowater, rather than AbitibiBowater Canada. In light of the fact that the value of the AbitibiBowater Canada Exchangeable Shares, determined through dividend and liquidation entitlements and capital appreciation, will be determined by reference to the consolidated financial performance and condition of AbitibiBowater rather than AbitibiBowater Canada, which in fact will have no real direct operations, information respecting AbitibiBowater Canada, including financial information, is not relevant to holders of Abitibi Common Shares who elect to receive AbitibiBowater Canada Exchangeable Shares.

65. Holders of AbitibiBowater Canada Exchangeable Shares will effectively have a participating interest in AbitibiBowater, which will carry on the business and affairs currently conducted by each of Abitibi and Bowater on a stand-alone basis, and will not have a participating interest in AbitibiBowater Canada.

66. As it will continue to be an exchangeable security issuer, AbitibiBowater Canada will have no real operations and, immediately following completion of the Proposed Transaction, its sole material assets will consist of the shares of the capital of Bowater Canadian Forest Products Inc.

67. Consequently, it is the financial information relating to Abitibi, Bowater and AbitibiBowater, which will be included in, or incorporated by reference into, the Circular, that is directly relevant to the holders of Bowater Canada Exchangeable Shares and Abitibi Common Shares making a decision in connection with the Proposed Transaction, as ultimate holders of shares of AbitibiBowater Common Stock following the completion of the Proposed Transaction.

Compilation Report

68. There exists no equivalent requirement to include a compilation report together with pro forma Financial Statements contained in a prospectus under United States securities laws and regulations.

69. The inclusion of a compilation report to be signed by an independent auditor, which would be contained in the Circular for the sole purpose of satisfying the requirement set out in the Legislation, would require separate circulars to stockholders in the United States and shareholders in Canada. It is more beneficial to the shareholders of Abitibi, Bowater and AbitibiBowater to receive a joint circular.

70. There is no longer a requirement under the Legislation for pro forma Financial Statements that are included in a business acquisition report to be accompanied by a compilation report.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make this decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted.

"Josée Deslauriers"
Director of Capital Markets
Autorité des marchés financiers