RR Donnelley buys CGX – Strategic Brilliance or Competitors’ Opportunity?

The printing industry was abuzz this past month with opinions about why Consolidated Graphics, the billion dollar master of the commercial printing rollup, agreed to be acquired by RR Donnelley. The deal, valued at $620 million plus assumption of Consolidated Graphics’ debt, did not reward the shareholders of Consolidated with a premium – the company sold out effectively at its current market price. Apparently top management at Donnelley liked what they saw, but only at a relative bargain price.

According to much of the buzz, many folks in the industry, myself included, view this deal as a marriage of strange bedfellows. The buyer is the undisputed printing industry behemoth that serves large corporate accounts through its integrated network of high volume facilities, sophisticated data management, and well-oiled corporate structure; the seller a collection of mid-market commercial printing shops mostly purchased from owner-operators during the 1990’s rollup craze in the printing industry.

Industry consultant and pundit Wayne Peterson wrote a cogent and somewhat compelling argument that Donnelley knows exactly what it’s doing, and that it will use the Consolidated Graphics network to deliver product locally to large corporate accounts that have signed onto its comprehensive “we do it all” print management solution. Printers that compete with Donnelley and Consolidated, most notably Dustin LeFebvre of Specialty Print Communications, have blown the battle bugle and urged independent printers to get into the ring and fight. The prize is the sales reps and customers that may feel that their “local” Consolidated printer is now just another cog in the giant Donnelley wheel. We have seen numerous comments that simply note the writer’s belief that Donnelley will consolidate Consolidated, closing plants once it absorbs as much of the top-line revenue as fits its own strategy. As readers of The Target Report know from our post reviewing August ’13 transactions, Donnelley is not sentimental about closing formerly very successful printing plants, having already closed five this year. Whichever way this plays out, I suspect that the independent mid-size commercial printer will be watching closely.

The Mittera Group acquired Wisconsin Web Offset. The company now has a portfolio of printing companies with combined sales of $95 million and operates eight facilities in the Midwest. In addition to this latest acquisition, the company markets its services under various brand identities including Rock Communications, Colorfx, Sundog Studios, and Catchfire Media. Colorfx has itself been listed on our deal log on three separate occasions during the past two years, having acquired Capital City Graphics, Acme Printing, and Demco Printing, all three in Iowa. The Mittera Group clearly is executing a strategy of growth through serial acquisitions within its current geographic range. Are we witnessing the beginning stages of another printing industry rollup now that Consolidated Graphics is disappearing as an independent company?

Publishers of regional newspapers and publications were active in October. Consistent with a current trend in the newspaper industry, which we noted earlier in the year, The Salt Lake Tribune is selling off its printing plant assets to concentrate on its editorial products and delivery of that content through digital media. The buyer of The Tribune’s interest in the printing plant, the Deseret News, will now print and distribute The Tribune’s print edition as well as its own. Freedom Communications, in Santa Ana, California, is back on our deal log. In May ’12, Freedom sold four Midwest newspapers to Versa Capital Management. This time they are the buyer of the Press-Enterprise newspaper in Riverside, California - the purchase included the printing facility as well as the publishing assets. In Lancaster, Pennsylvania, Engle Printing & Publishing purchased Lancaster Magazine from Brookshire Printing. Brookshire also sold off its commercial printing operation to a different buyer and announced plans to cease operations after the sales are completed.

Sandy Alexander in Clifton, New Jersey, having just completed the management buyback of the company from its private equity backers in August ’13, announced the acquisition of SALT Studios, a high-end retouching and computer graphics studio in New York City. This brings the web, sheetfed, and wide-format printer upstream into the creative realm, one of the three paths to diversification we have observed as commercial printers strive to become “marketing service providers” (MSP’s).

For the first time in the two and half years that we have been researching transactions in the printing, packaging, paper, publishing, and related industries, we did not find any Chapter 11 bankruptcy filings, and there were no reported plant closings. We found only two Chapter 7 liquidations of small printing companies that focused on selling promotional items. Following the reduced number of bankruptcy filings in September, it appears that failures, at least those requiring protection of the bankruptcy court, have subsided, while M&A transactions continue at a brisk pace.

2013 October - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

Deal Party #1
(Surviving Entity)

Pre-Deal
Revenues
($Mil )

Party #1 Address

Deal Party #2

Pre-Deal
Revenues
($Mil )

Party #2 Address

Date
Deal
Public

Deal
Value
($Mil)

Deal Structure
(Intermediary)

Notes

Press
Releases

The Mittera Group

No Data

Des Moines, IA

Wisconsin Web Offset

No Data

Brookfield, WI

10/31/13

No Data

Acquisition
(Eisen Fox & Company)

Catalog & publication printing

Trending Articles