Abstract

http://ssrn.com/abstract=1176602
 
 

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Analysis of a Merger from a Governance Perspective: The Case of Abitibi-Consolidated and Donohue


Paul André


ESSEC Business School - Accounting and Management Control Department

Michel Magnan


Concordia University - Department of Accountancy

Sylvie St-Onge


HEC Montreal

July 25, 2008


Abstract:     
Adopting a governance perspective, this clinical study analyses the merger between closely-held Donohue Inc. and widely-held Abitibi-Consolidated Inc. Some key findings emerge. First, the absence of a controlling shareholder and weak board governance at Abitibi might explain both (a) its executives' interests in the transaction and (b) its CEO's compensation increase despite underperformance. Second, an inter-generation shift of control at Quebecor (Donohue's parent company) led to a strategic reorientation that (a) transformed Donohue into a target and (b) insured that Donohue's executives had incentives to pursue a deal. Finally, Donohue's non-controlling shareholders benefited from the transaction while Abitibi shareholders experienced wealth reduction. The merger's aftermath provides some counter evidence regarding blockholders' power in widely-held firms.

Number of Pages in PDF File: 42

Keywords: Merger, Managerial compensation; Governance, Dual class shares, Pyramid structure, Canada

JEL Classification: G14, G32, G34

working papers series





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Date posted: July 27, 2008  

Suggested Citation

André, Paul and Magnan, Michel and St-Onge, Sylvie, Analysis of a Merger from a Governance Perspective: The Case of Abitibi-Consolidated and Donohue (July 25, 2008). Available at SSRN: http://ssrn.com/abstract=1176602 or http://dx.doi.org/10.2139/ssrn.1176602

Contact Information

Paul André (Contact Author)
ESSEC Business School - Accounting and Management Control Department ( email )
Av Bernard Hirsch
Cergy-Pontoise 95021
France
Michel Magnan
Concordia University - Department of Accountancy ( email )
Montreal, Quebec H3G 1M8
Canada
Sylvie St-Onge
HEC Montreal ( email )
3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
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