Streeter, Banta Say No to Burton Offer

STAMFORD, CT—Bob Burton didn’t wait long to identify his next big project. Neither did he have to wait for a response to his overture.

Reeling from a 52 percent decline in quarterly profits, its shares trading at a two-year low and a restructuring ordered for its print sector, Banta might have viewed Cenveo’s proposed, unsolicited acquisition as either fortuitous or extremely predatory. But, in the end, the Menasha, WI-based printer decided it had seen enough.

Only one week after Burton’s public revelation of a $1.12 billion offer, or about $46 per share, for the struggling company, Banta Chairman, President and CEO Stephanie Streeter shot back with a short and not-so-sweet negative response.

“The (Banta) directors fully support our management team, which remains focused on executing our strategic plan to deliver long-term value for our shareholders,” Streeter wrote in a letter dated August 16.

“In the unanimous view of our board, you have provided nothing more than a highly conditional and ambiguous overture,” she added. “In fact, your purported ‘offer,’ which is subject to numerous contingencies...is illusory and therefore merits no further discussion.”

Burton, Cenveo chairman and CEO, fired off an open letter to Streeter on August 9 expressing his “disappointment in hearing from you that Banta is not for sale” in response to his offer which, when made public, sent Banta’s stock soaring $12 to the $46 range.

The offer is contingent upon Cenveo obtaining adequate financing. Although Burton feels the financing would be “readily obtainable.”

Burton cited unreturned phone calls and e-mails, along with a desire to provide full disclosure to shareholders of both companies, as motivation for making the letter public.

A miffed Streeter responded with her own letter, refuting that the parties had ever discussed a deal. She wrote that Burton’s financial advisors made an “ambiguous request to discuss your interest in our company” and she agreed to arrange a time to speak with them and learn more about Burton’s interest in Banta.

“At no time did your advisors mention any of the economic terms or conditions stated in the hostile, public overture...We find your actions to be inexplicable,” she also wrote.

Streeter added that Banta’s board would review Burton’s letter of interest with its financial and legal advisors, and offer a response in short order. A week later, the answer was no.

Even if viewed as an attempt to catch Banta off balance and put Streeter on the defensive, Burton’s quest has some industry observers wondering whether the Banta chief exec will ultimately maintain support of the board.

“Burton’s record is such that this (acquisition) will happen. He just saw great timing,” said one source, speaking on the condition of anonymity.

The offer came only days after Banta’s dismal quarterly report, when it announced a reorganization of its print sector in order to cut costs and provide long-term stability.

Banta’s second quarter earnings plummeted from $33.8 million in the second quarter of 2005 to $16.1 million in 2006. The sale of its healthcare business fueled its 2005 performance.

Streeter said the company was reorganizing its five print divisions into two divisions, thus eliminating management infrastructure while reducing general and administrative costs.

Its book, publications and consumer catalog divisions will now be called Banta Publishing & Catalog Solutions. Its direct marketing and literature management divisions will be meshed under the heading Banta Direct Marketing Solutions. The Print Sector reorganization is expected to generate annualized pre-tax savings of approximately $3 million, beginning in 2007.

While there appears to be little overlap between the two companies, one senior printing executive familiar with the situation believes Burton’s interest has little to do with meshing their products and services.

“This doesn’t appear to be a synergy-driven play between Cenveo and Banta as much as it does a view that Banta has a high cost structure in the midst of facing some major business issues,” he said. “With or without Cenveo as the vehicle to pursue Banta, it seems that Banta’s situation is one that would have naturally attracted Bob Burton’s interest.”