NEW YORK, May 5, /PRNewswire/ -- James River Corporation (NYSE: JR) and
Fort Howard Corporation (Nasdaq: FORT) announced today that they have signed a
definitive merger agreement creating a preeminent worldwide consumer products
company with a strong competitive position and outstanding prospects for
growth.  The new company, which will be named Fort James Corporation, will
have annual sales in excess of $7 billion.
    Under the agreement, shareholders of Fort Howard will receive 1.375 shares
of Fort James common stock for each share of Fort Howard common stock.  This
represents a per share value of $42.45 and a total value of $5.8 billion to
Fort Howard shareholders, including the assumed Fort Howard debt, based on the
James River closing stock price of $30.875 on May 2.  Shareholders of James
River will retain their current number of shares.  Excluding non-recurring
items and an anticipated reorganization charge, the merger is expected to be
accretive to pro forma 1997 earnings, without anticipated synergies, and
accretive to 1998 earnings by approximately 10 percent, including synergies.
    The transaction is structured to qualify as a tax-free reorganization and
will be accounted for as a pooling of interests.  The merger, which is
expected to be completed at the end of the summer, is conditioned on receiving
regulatory clearances in the United States and Europe and requires the
approval of the shareholders of both companies.  Morgan Stanley and certain
other shareholders, representing approximately 20 percent of Fort Howard's
fully diluted shares, have agreed to vote in favor of the merger.
    "This merger opens the way for two strong companies to emerge as a
powerful single force in the consumer goods industry," said Miles L. Marsh,
James River's chairman and chief executive officer.  "Because Fort James will
be able to compete more effectively as a combined company than we could have
individually, this merger will be attractive to shareholders, customers and
employees."
    Marsh added, "Fort James will benefit from the complementary strengths of
James River's strong brands and marketing skills and Fort Howard's
exceptional, low-cost manufacturing base and leadership in commercial
products.  The broad North American focus of both companies, as well as their
strong pan-European presence, represents a gateway to tremendous global
opportunities."
    Michael T. Riordan, Fort Howard's chairman and chief executive officer,
noted "Our combined product lines, supported by strategically located assets
and world-class manufacturing capabilities, create a strong competitive
position that will fuel long-term growth.  In addition, the significant
operating cash flow of the combined company, which totaled more than $1
billion on a pro forma basis in 1996, will allow for an aggressive pace of
debt reduction, while at the same time support strong business growth.  Both
James River and Fort Howard have made significant recent progress in reducing
debt, and Fort James remains committed to this important objective."
    Fort James will be able to offer a broad range of tissue and tabletop
products.  Its retail products, to be distributed in grocery and drug stores,
mass merchandisers, and warehouse clubs, include such well-known North
American brands as Quilted Northern, Soft'n Gentle, Brawny, Mardi Gras, Vanity
Fair, Green Forest and Dixie.  In addition, Fort James will have a strong
presence in the European market with brands such as Lotus, Nouvelle, Colhogar
and Tenderly.  The company will also be a leading supplier of store brands.
Away-from-home products will be sold primarily through paper, foodservice and
janitorial distributors to serve the lodging, industrial, health care,
restaurant, foodservice, leisure, transportation and office building sectors,
as well as schools, governments and retail establishments.
    The merger is expected to generate cost savings estimated to total at
least $150 million in 1998, increasing to more than $200 million per year over
time.  Fort James intends to reduce expenses and increase efficiency by
combining complementary technologies, optimizing product manufacturing and
logistics across the combined systems, increasing purchasing efficiencies,
eliminating redundant overhead costs, consolidating work forces where
duplication exists and increasing product quality and productivity.  To cover
the cost of implementing these plans, Fort James expects to take a
reorganization charge in the quarter in which the merger is completed.  The
amount of the charge has not been determined.
    At the same time, Fort James will continue the cost reduction program
begun by James River in 1995, which is expected to deliver enhanced savings as
this program matures.  A portion of the expected incremental savings will be
reinvested in Fort James' brands in order to grow market share and accelerate
top-line growth.
    Under the terms of the merger agreement, which has been unanimously
approved by the boards of directors of both companies, Marsh will serve as
chairman and chief executive officer of Fort James and Riordan will be
president and chief operating officer.  The board of directors of Fort James
will be comprised of 15 directors, 11 from James River and four from Fort
Howard.  Fort James' senior management team will also include key James River
and Fort Howard executives.  A new executive headquarters for Fort James'
senior management will be established in the Chicago area.
    "From the beginning, we have looked at this as a merger of equals," said
Marsh, "with both companies contributing important product strengths,
strategic assets and management talent."
    "There has been a very high level of mutual respect in all of our
discussions," added Riordan, "and I believe we will be able to move very
quickly to capitalize on synergies and aggressively pursue growth
opportunities."
    As a result of the merger, Fort James will have a total market
capitalization of $11 billion, including debt of $4.4  billion.  Fort James
will have approximately 218 million outstanding fully diluted common shares.
    Fort Howard currently pays no dividend.  James River pays a current
quarterly cash dividend of $.15 per share, which will be the initial dividend
rate of Fort James.
    James River Corporation, with 1996 consolidated sales of $5.7 billion, is
a leading marketer and manufacturer of paper-based consumer products,
packaging, and business, printing and converting papers.  The company has a
total of approximately 60 manufacturing facilities located in the United
States, Canada and ten European countries.  The second largest worldwide
producer of tissue products, James River markets such widely recognized brands
as Quilted Northern bathroom tissue, Brawny paper towels, Vanity Fair napkins,
and Dixie cups and plates in North America, and Lotus bathroom tissue, towels,
and facial tissue in Europe.
    Fort Howard, with 1996 consolidated sales of $1.6 billion, is a leading
producer of tissue products for away-from-home customers in the United States,
and a leading supplier of value brands and private label products for retail
tissue customers.  With three manufacturing facilities in the United States,
one operation in the United Kingdom and a joint venture in China, Fort
Howard's products include bath and facial tissue, towels, napkins, wipers and
specialty nonwoven products.  Familiar brand names include Mardi Gras, Soft'n
Gentle, and Green Forest.
    Forward-looking statements in this release are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are not guarantees of future performance and
are subject to risks and uncertainties regarding this transaction.  Such risks
and uncertainties include, but are not limited to, the satisfaction of the
conditions to close the transaction; determinations by regulatory and
governmental authorities; the ability to successfully integrate the James
River and Fort Howard businesses; the ability to achieve synergistic and other
cost reductions and efficiencies; general business and economic conditions;
competitive pricing pressures for the company's products; changes in raw
material, energy and other costs; and opportunities that may be presented to
and pursued by the company.  Any of these risks or uncertainties may cause
actual results or future circumstances to differ materially from the forward-
looking statements contained in this news release.
    Today's news release, along with past releases from James River, is
available by fax, at no charge, by calling 800-758-5804, ext. 457350.  You may
access James River's corporate-wide site at Internet address
http://www.jamesrivercorp.com, and Fort Howard's corporate-wide site at
Internet address http://www.forthoward.com.

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