Transition to Digital Printing Roils the Book Industry

The following are deals, court filings and closures in the printing, packaging, paper and related industries for the month of July:

Transactions in the book printing industry took center stage in July; the headline act was the Chapter 11 bankruptcy filing of Cengage Learning. The company is now moving rapidly to a digital strategy, as it seeks to shed more than $4 billion in debt through the bankruptcy process. CEO Michael Hansen, as reported by Bloomberg, squarely placed the blame on the company itself for not adopting digital quickly enough, due to the “belief that the print model would hold up better than it actually did.”

Private equity firm Castle Harlan increased its position in the book printing industry with its investment in Bookmasters, which has expertise in digital book printing. The deal was announced as a strategic partnership between Bookmasters and Castle Harlan’s existing portfolio company, Baker & Taylor, the world’s largest distributor of books and related materials. The two companies will continue to operate independent of each other.

Edward Brothers Malloy, formed in February 2012 with the merger of two book manufacturing companies, announced the closure of one of its two printing facilities in Ann Arbor, MI. John Edwards, CEO of the company, attributed the closure to a significant decline in the demand for longer runs which utilized the offset printing process. He also noted that the closure is consistent with the company’s strategic effort to grow its digital book printing business. The company is capable of the “distribute-then-print” model of content delivery, using its several remote digital printing facilities in the United States, as well as its one facility in the United Kingdom.

Bucking the trend toward digital book printing, Publisher’s Graphics, an innovator in internet-based ordering and online sales of digitally printed books, acquired Corley Printing, a traditional offset book printer with capability to produce longer runs printed on offset presses.

Consolidation was once again the main act in the packaging industry, with an assist by private equity. Chicago PE firm Svoboda Capital Partners was back in the market. Svoboda acquired TVC Label and “bolted” the company onto its platform company, M.E.I. Labels, which it acquired in December 2012. Madison Dearborn Partners, also of Chicago, announced that it agreed to buy Multi Packaging Solutions from Irving Place Capital, preparing Multi Packaging Solutions for a second act in its growth from inception in 2005 to global player in the packaging industry. Back on the deal log for the third time in less than two years, publically traded Multi-Color Corp. acquired Flexo Print, a label printer in Guadalajara, Mexico.

Clarence Schawk, founder of the global image management company, once told me that he “did not want to own iron,” rather he preferred to remain firmly on the image and brand management side of the graphics business. True to this vision, Schawk, now rebranded at the corporate level as SGK, stuck to its script, selling its large-format printing facility in Los Angeles, California. On the buy side of the transaction, and clearly articulating the opposite strategy, dedicated to being a technology-driven company, The Garvey Group purchased Schawk’s Los Angeles large-format facility. Garvey is truly a company that likes the heavy iron, announcing last month that it bought a six-color, 64˝ UV-capable offset press, the eighth KBA press in its troupe of oversize offset presses.

Ricoh purchased a minority interest in Avanti, one of the few remaining independent providers of printing management information systems (MIS). One day later, Hewlett-Packard announced that it was closing Hiflex, the print MIS system it purchased last year. Meanwhile, Electronics for Imaging (EFI) continues to dominate the print MIS business, having acquired and then discontinued numerous competitors. Will Ricoh succeed where HP failed?

The print management business (aka purchase aggregation and/or print outsourcing) was active in July. Innerworkings announced the acquisition of EyeLevel, a company which produces retail displays and fixtures in the Czech Republic. This follows the company’s acquisition last month of a packaging design and sourcing company in the UK. Another player in the print management space, Pitney Bowes, is bowing out of the business, selling its PB Management Services unit to Apollo Global Management. Apollo is the huge investment firm that proclaims its expertise to be contrarian, value-oriented investing, with significant distressed expertise. The print management business is changing—are these transactions signals that the overcapacity in the offset printing business might be lessening, possibly mitigating the advantages that endemic overcapacity afforded the print management firms? More on this topic to come in August!

July was another busy month for transactions in the printing and related industries. Click here and scroll to the charts at the bottom of the article, to see the deal logs for complete details and links to source articles.

About the Author
Mark Hahn is the Principal of Graphic Arts Advisors and publisher of The Target Report, a high-level overview of transactions in the printing and related industries. Hahn recently served as CFO/COO and corporate development officer of FLM Graphics in Fairfield, NJ. Prior to FLM, Hahn was a managing director of Brownstein Corp., a nationally recognized financial advisory firm, where he now serves as senior advisor. Hahn also worked in the renewable energy and energy efficiency industries, and served on the advisory board of EcoGreenHotel as an early investor in the company. He attended Ramapo College of NJ, earning degrees in Business and Environmental Science. Hahn has been published in printing industry trade and management journals. He has served as a volunteer for Court Appointed Special Advocates for Children (CASA), providing oversight to the N.J. Family Court on behalf of abused children.