Donelley’s Banta Acquisition: What’s In It For Publishers
On the heels of the announcement by the world’s largest printer, RR Donelley & Sons’ that it has agreed to buy Banta Corp. for $1.3 billion, publishers may be wondering what’s in it for them.
Although the acquisition gives publishers fewer choices when it comes to selecting a printer – Donnelley and number two printer, Quebecor World dwarf most of their printing competition – it’s not expected to drive printing costs up, says Alex Brown, president of Printmark, a consulting firm that helps publishers with print contract negotiation and contract analysis.
“The low prices we’re seeing now are not stemming from competition so much, but from the need to fill the plants that printers own that are suffering from excessive capacity,” she says. “That said, publishers shouldn’t become sanguine. They shouldn’t say Quebecor bought World Color and prices still fell so they’ll continue to fall. They fell because of the need to fill space at plants that are overcapacity.”
Brown says the excessive capacity stems from the lag time that occurs at plants between publishing cycles and that the Banta and Donnelley merger isn’t likely to solve the problem any time soon, even though Banta has announced plans to consolidate and/or close facilities and lay off workers. “This is not a problem that’s just going to disappear overnight,” she says.
But the merging of two printing heavyweights, Banta, with annual revenues of about $1.54 billion, and Donnelley, with revenues of more than $9 billion a year, will make for a more diverse company that will be able to offer its clients more services, says Brown. “The net result of this fusion is that it puts Donnelley in a few markets that it’s not particularly strong in,” she says. “Banta has been courting the direct mail and asset management realms for some time. They also buy paper for their customers and work with lots of (shorter-run) publishers.”
Although Donnelley has a shorter-run division, most of its clients are long-run publishers, such as Time Inc. Banta’s experience in this area could lead to a more dominant position for Donnelley, says Brown. “They have discovered that it is very profitable,” she says. “So this could be a good growth path for Donnelley to pursue.”
The merger also gives Donnelley more purchasing power, which could result in the ability to buy ink, paper, staples, polybagging and other printing necessities at a cheaper rate. If, in fact, Donnelley decides to pass these savings along to retain existing customers or to attract new business, publishers would reap the benefits, Brown says.
Also, Banta will now have the opportunity to participate in Donnelley’s co-mailing structure. “There are logistics issues and how to get Banta connected to Donnelley’s co-mailing center that will have to be worked out,” she says. “But this does have the potential for postage savings.”
Chicago-based RR Donnelley announced last week that it would acquire Banta. The deal is expected to close in the first quarter of 2007. The announcement was made just one day after a $1.2 billion unsolicited offer from Cenveo, a maker of envelopes and provider of digital printing services, expired. Menasha, Wisconsin-based Banta rejected Cenveo’s proposal in early October, but did not rule out the possibility of a future sale or merger.