YEAR IN REVIEW — 2006: BANTA ON THE LOOSE
THE 2006 printing industry campaign provided more than enough ‘oohs’ and ‘aahs’ to keep followers on the edge of their seats, including a summer blockbuster takeover attempt of Banta Corp. by Bob Burton and Cenveo Inc. And the subject of postal reform, which has festered for years without a resolution, appeared on the brink of falling to pieces at the last minute.
The M&A train seemed to pick up speed in 2006, though some parties managed to botch the due diligence aspect and instead land in court. Reorganization was in the air (unfortunately, so were job losses) and some of the biggest names in the industry changed addresses.
The last 12 months certainly haven’t lacked for drama. In January, we reported that Quebecor World sold five companies that no longer fit into its master plan, and those companies rebranded under the name MATLET. Most of the individual companies reclaimed their former ownership, led collectively by Gary Stiffler, president and CEO.
Veteran PIA/GATF public affairs crusader Ben Cooper departed the association after 27 years to, among other things, take the executive director role with The Print Council, an advocacy group supporting printed products.
Just a few months after Bob Burton’s group had taken control of Englewood, CO-based Cenveo, his long-time executive took the helm of the company. Thomas Oliva, who served tours with Burton at World Color and Moore Corp., was named president of Cenveo.
The industry suffered another fatality in mid-January when International Paper employee James “Larry” Merritt was killed when the debarking machine he was working on pinned and crushed him. The pneumatic cylinder Merritt was working on at IP’s Sampit Lumber Mill in Georgetown, SC, lowered and trapped him.
In February, the U.S. Senate joined the House of Representatives and finally passed its version of the postal reform bill, setting the stage for the two chambers to negotiate a single piece of legislation. But the issue is currently in the 11th hour, leaving reform in great peril.
In the middle of the month, Burton revealed some of the moves that were designed to reduce Cenveo’s overall cost structure by $75 million, including the closure of its Centennial plant in Denver and an envelope manufacturing facility. The nationwide cost-cutting initiative was slated to claim roughly 1,400 jobs.
Press manufacturing giant MAN Roland announced it was going public in March. MAN AG and Allianz Capital Partners created a joint venture to purchase MAN Roland Druckmaschinen and take it public. MAN AG planned to retain 35 percent equity in the company.
Des Plaines, IL-based Schawk Inc. sold its educational product development, catalog, publication and New York-based advertising premedia operations to The CAPS Group for $29 million in cash plus assumed liabilities. The advertising premedia facility was renamed HudsonYards, with industry veteran and former PRINTING IMPRESSIONS/RIT Printing Industry Hall of Fame inductee Diane Romano taking on the role as president and COO.
Quebecor World of Montreal reorganized its U.S. book and magazine platform in April, closing two facilities and letting go more than 800 employees. The printer also named former Sun Chemical executive Wes Lucas as its new president and CEO, replacing Pierre Karl Peladeau.
Speaking of leadership changes, the torch was passed at Sussex, WI-based Quad/Graphics, where Joel Quadracci assumed the CEO position in place of his retiring uncle, Tom Quadracci. The elder Quadracci retired on his 35th anniversary with the company, founded by his brother, Harry V. Quadracci.
In a shocking announcement, Houston-based Consolidated Graphics (CGX) announced it was exploring strategic alternatives to enhance shareholder value, hiring UBS Investment Bank in an advisory capacity. One of the alternatives explored was a possible sale of the company. But before the summer could heat up, CGX decided to stay the course.
In May, the USPS proposed an 8.5 percent rate increase that, if passed by the Postal Rate Commission, would likely take effect in May of 2007. The USPS also proposed new pricing structures for different shapes of mail that aligns prices with processing costs.
Windy City printing giant RR Donnelley unveiled its new mail consolidation and distribution management services facility in Dallas. The new plant allows Donnelley to better serve direct response marketers, magazine publishers, catalogers and other mailers in the Southwest.
Koenig & Bauer AG (KBA) CEO Albrecht Bolza-Schunemann told a German newspaper that KBA was interested in creating a relationship with press manufacturing competitor MAN Roland, either through a partnership or acquisition. MAN Roland responded that it was premature to speculate on a future relationship.
The summer provided some lessons on good and bad M&A etiquette. Valassis Communications, of Livonia, MI, agreed to shell out $37 per share, or $1.3 billion, for ADVO. A short time later, Valassis sued ADVO in chancery court to rescind the merger agreement, claiming ADVO intentionally provided false information and “withheld material information” regarding operating income. ADVO’s shareholders approved the deal anyway, and the company returned volley with a counter-suit against Valassis.
In a more peaceful, unlitigated deal, Cenveo acquired prescription label specialist Rx Label Technology, which generates $40 million in annual revenues, from Pfingsten Partners and Hilco Equity Partners.
In Baltimore, Vertis became Vertis Communications while, on the association front, George Ryan left his post as executive vice president and COO of the PIA/GATF to take over as president and CEO of the Printing Association of Florida.
The summer didn’t truly heat up, though, until Burton made his bid to acquire Menasha, WI-based Banta. Stephanie Streeter, chairman, president and CEO of Banta, rejected early bids of $46 and $47 a share, then announced the company would explore strategic alternatives aimed at creating shareholder value. One such move was to declare a special $16 dividend. Banta, meanwhile, reorganized its print sector to cut costs in the face of plummeting earnings.
The industry’s two heaviest hitters, meanwhile, were looking for ways to cure the summertime blues. Wes Lucas, the new Quebecor World president and CEO, unveiled a transformation plan that included reducing the company’s workforce by about 1,700 in 2006, with facility closures in Tennessee, Ohio and Wisconsin. RR Donnelley, on the other hand, reportedly held talks with several leveraged buyout (LBO) firms. The company wouldn’t comment on the published reports, but it didn’t take long to realize that Donnelley had a change of heart and direction.
A report in the Wall Street Journal cited examples in which three financial printers padded their bills, which were termed vague and difficult to decipher. Additionally, the story noted that printers are often chosen based upon the gifts they offer clients, from sporting event and concert tickets to free vacations.
More than 23,000 people ambled into McCormick Place South in mid-October for Graph Expo and Converting Expo 2006, where the surprise announcement came that Vince Lapinski was taking over as CEO of MAN Roland North America, replacing Yves Rogivue. As for Rogivue, he planned to join Muller Martini as head of its Printing Systems division in Switzerland.
Four astute students of the commercial printing industry were also recognized during Graph Expo for their long and distinguished careers with induction into the PRINTING IMPRESSIONS/RIT Printing Industry Hall of Fame. They included: James Hopkins of Hopkins Printing in Cincinnati; Rémi Marcoux of Montreal-based Transcontinental; Tom Quadracci of Quad/Graphics in Sussex, WI; and Jesse Williamson of Dallas-based Williamson Printing.
Burton and Streeter continued to exchange letters as the leaves began to turn. After Streeter rejected his $47 a share bid, Burton came back with what he deemed to be his “best and final” bid of $50 per share, confident that Banta would not find any suitors willing to ante up. A proxy battle ending in a special share- holder vote seemed likely as Burton set an October 31 deadline for Banta to accept his offer.
The biggest shocker occurred at the end of October, when RR Donnelley seemingly came out of nowhere and reached a deal to acquire Banta for $52.50 per share, a total of roughly $1.3 billion. The month-long negotiations were kept air tight and the announcement came on the heels of Burton formally withdrawing his $50 a share proposal. Streeter was to remain with the company during the transition phase before leaving to pursue other interests.
Postal reform seemed less and less likely as the year drew to a close. An 11th hour objection by the National Association of Letter Carriers stalled efforts by the House and Senate to pass joint legislation prior to the election recess, leaving the so-called “lame duck” session between early November and the holiday season as the final resort. In the event reform is not passed, many Congressional members are skeptical as to whether the 110th Congress will pick up the cause.
Not only did CGX decide to stay the course, the company went back to its old transactional tricks, acquiring The Hennegan Co. of Florence, KY, just across the river from Cincinnati. IWCO Direct of Chanhassen, MN, meanwhile, proved to be the knight in shining armor for 450 employees of Cox Target Media’s Elm City, NC, plant when it announced the purchase of the former Valpak coupon manufacturing facility.
What a wild ride 2006 proved to be…top that, 2007! PI
In Memoriam
The following is a list of some members of the printing industry who passed away during 2006:
