Special Report: Parsing the Implications of a NewPage-Verso Deal
Any partnership between the two paper industry giants would certainly raise flags for the publishing industry.
"An outright merger of NewPage and Verso would give one company a huge amount of control over the magazine paper market in the U.S.," Tree told Publishing Executive. "A lot of publishers would definitely pick up the phone to call smaller producers and European mills so that they wouldn't end up being too dependent upon the new giant. I'll bet the real possibility of some less formal tie-up between NewPage and Verso already has some folks looking for new suppliers."
Alex Brown, founder of industry consultancy group Printmark, says any new relationship between Verso and NewPage would have to "pass through a number of practical hurdles before it resembles the dreaded ultimate domestic market consolidation that magazine publishers can, and should, fear."
It's also important, she says, to note that a NewPage bankruptcy (a very real possibility without Apollo's help) would not exactly bode well for publishers because it would deprive the industry of a major mill and have the same effect of reducing choice as a merger. Also, she says, even if Apollo gains an ownership stake, it does not guarantee Verso would have a management role.
"The antitrust implications look like a barrier, but companies have sometimes skirted such problems by demonstrating how large the overall market is, never mind that many of the purveyors and products are aimed at different segments," she says. "In short, for the Verso-NewPage Godzilla to be unleashed upon us, Apollo will have to link the companies, and the FTC will have to bless the merger. Neither is easily achieved."
But, as Brown notes, it's fair to ask if a merger would really "constitute doomsday."
Normally market consolidation leads to price increases, but even in the case of a NewPage-Verso merger, there are severe market pressures holding the price of paper down, Brown says. In addition to sagging domestic demand, there is the fact of globalization. Both Brown and Tree point to the possibility of more and more paper coming from Europe and Asia.