A stoush is on between two of the world's largest printing companies – R.R. Donnelly and Quad/Graphics – for ownership of book printer Courier Corporation as industry consolidation enters crucial phase.
Courier had already agreed to a takeover deal from Quad/Graphics, the Chicago-based commercial printer, when R.R. Donnelly charged in to raise the bar with a counter offer. As Courier is a publicly listed corporation its board of directors are legally bound to consider the new and higher offer.
The original offer from the Wisconsin-based Quad/Graphics for the second largest book manufacturer in the US values the business at US $260 million. Under the terms of the agreement, shareholders of Courier will receive the equivalent of a total purchase price of $20.50 per share, consisting of cash and shares of Quad/Graphics stock.
Since the announcement the shares have risen to $23.69 and the Courier directors of the company are being investigated by class action lawyers as to whether they failed to adequately shop the Company and obtain the best possible value for Courier’s shareholders before entering into an agreement with Quad/Graphics. The directors have not changed their opinion about reccommending the Quad deal.
The new offer from R.R. Donnell, which has a market capitalisation of $3.4 billion and claims to be the largest commercial printer in the USA, has a value of $23.00 per share, which is still below current market values. It also consists of cash and stock.
The offer from Quad follows its decision to buy 20 HP high-speed digital presses for its own book production processes. The tussle highlights how the changing marketplace for books will continue to consolidate under pressure from the new technology.
The battle also illustrates the growing scarcity of high quality printing assets for sale following years of consolidation and an industry shakeout following the GFC. Courier is a strongly profitable corporation with a good market value. The takeover bids from the two printing giants are likely to be motivated by a considered growth strategy, not the opportunistic picking up of troubled business characteristic of recent times.
A similar situation is emerging on the local market where the supply of troubled printing businesses is drying up, leaving consolidators facing the real prospect of having to pay market value if they want to expand by acquisition. The latest buy-out by Blue Star of Thompsons is a case in point.