Courier Corp. Rejects Quad, Agrees to RR Donnelley Deal

NORTH CHELMSFORD, MA—If there was any doubt that Courier Corp. is one of the most respected book printers in America, that was put to rest by the January pursuit of the firm by its two chief competitors—RR Donnelley and Quad/Graphics.

Quad/Graphics struck first by announcing a new three-year book platform initiative buoyed by the purchase of at least 20 high-speed HP color digital inkjet web presses and, for an encore, revealed an agreement to acquire Courier Corp. for $260 million, or $20.50 per share. But the Sussex, WI-based Quad/Graphics soon had competition.

Within days of the Quad offer becoming public, on Jan. 27 Courier revealed that it had received a non-binding, unsolicited proposal from RR Donnelley to acquire it for $23.00 per share in cash and RR Donnelley common stock, subject to proration in the event that shareholders elect to receive more than approximately 49 percent cash or more than approximately 51 percent stock.

In the end, Courier Corp. decided that Donnelley's bid was too good to pass up and opted to terminate its agreement with Quad/Graphics. As part of the initial agreement, Quad/Graphics was given the opportunity to match RR Donnelley's offer, but declined to make any new proposal.

Also in accordance with the Quad/Graphics merger agreement, Courier Corp. paid Quad a $10 million termination fee. That amount will be reimbursed to Courier by RR Donnelley as part of their merger agreement.

"By adding our digital printing and content management capabilities to RR Donnelley's current business, we will be even better positioned to meet our collective customers' needs," said James Conway, Courier's chairman, president and CEO.

"Our customers can also continue to count on the same level of exceptional service and our employees will benefit from greater opportunities for professional growth and development. We are excited by the opportunities created by this combination and look forward to working with RR Donnelley to fulfill them."

Under the terms of the transaction, Courier's shareholders will have the option to elect to receive either $23.00 in cash or 1.3756 RR Donnelley common shares for each outstanding share of Courier they own. Such elections are subject to pro ration so that a total of 8.0 million shares of RR Donnelley common stock will be issued in the merger.

Based on the closing trading price of RR Donnelley's common stock on the NASDAQ on Feb. 4, the merger consideration represents a mix of approximately 49 percent cash and 51 percent stock, and a total transaction value of approximately $261 million, plus the assumption of Courier's net debt and payout of outstanding equity awards.

The acquisition is expected to be both deleveraging and accretive to RR Donnelley's non-GAAP earnings per diluted share within 12 months following the closing of the transaction, which is expected to occur in the second half of 2015. The completion of the transaction is subject to customary closing conditions, including Courier shareholder approval.