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Quad/Graphics Agrees to Buy Worldcolor

Under deal terms, Quad/Graphics shareholders will hold roughly 60% of shares.



By Jason Fell
01/26/2010

After rejecting a $1.83 billion offer from R.R. Donnelley last summer, the board of directors at Worldcolor, formally Quebecor World, has approved an offer from fellow printer Quad/Graphics to be acquired for an estimated $1.4 billion. The deal is
expected to close sometime this summer.

Under terms of the agreement, Worldcolor shareholders will receive approximately 40 percent of the outstanding shares of Quad/Graphics at closing and Quad/Graphics shareholders will hold roughly 60 percent. JPMorgan Chase and U.S. Bank have committed $1.2 billion to fund cash distributions, refinance Quad/Graphics’ existing revolving credit facility, refinance Worldcolor’s existing outstanding debt and to fund expenses incurred in connection with the transaction.

Quad/Graphics CEO Joel Quadracci will lead the combined company as chairman, president and CEO. “This transaction will enhance our leadership position in the printing industry through an expanded geographic footprint and a broader variety of product types and revenue-generating solutions,” Quadracci wrote in an e-mail to clients today. “In short, we will be better able to help you capitalize on print’s strengths in a multi-channel world.”

Quad/Graphics said it expects to realize $225 million in “pre-tax net annualized synergies” within two years following the deal. For the 12-month period ended September 30, 2009, Worldcolor and Quad/Graphics had $5.1 billion in aggregated unaudited revenue. Combined, unaudited/adjusted EBITDA was $647 million.

“I don’t see this as good news for magazine publishers as it will further reduce competition which may lead to higher print prices,” Bradner Smith & Company publication papers vice president Dan Walsh wrote in an e-mail to FOLIO:. “I would also not be surprised to see some Worldcolor plants shut down over the next year as a result of this purchase.”

Worldcolor—formally Quebecor World—filed for Chapter 11 bankruptcy protection in Canada and the U.S. in early 2008. Last May, fellow printer R.R. Donnelley sent an unsolicited letter to Quebecor expressing interest in purchasing the printer for roughly $1.35 billion. Donnelley upped the offer to $1.83 billion the following month but was effectively turned down by Quebecor’s board of directors, who at the time said that its own $1.5 billion plan of reorganization offered “superior recovery” and contains fewer risks than Donnelley’s offer.

Quebecor officially emerged from bankruptcy last July and changed its name to World Color Press.

By Jason Fell
01/26/2010




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