Year in Review--A Torrent of M&A
BY CHRISTOPHER CORNELL
Each little drop in the bucket doesn't amount to much, but after a while it can turn into a torrent; that's the metaphor that applies to the graphic arts industry in 1999. Each individual merger and acquisition during the course of the year didn't affect the industry that much, but, in the aggregate, 1999 will likely be remembered as the year in which the number of companies in it noticeably shrunk.
The biggest news story of the year was one just about everybody saw coming. Just after mid-year, following weeks of industry speculation, Quebecor Printing and World Color Press signed a deal in which Quebecor acquired all stock in the US$2.7 billion industry giant based in Greenwich, CT.
The acquisition was the largest in the history of the printing industry, and the newly combined company, Quebecor World, is now the largest commercial printer in the world.
And what Quebecor bought was a company that was considerably larger than it had been a year earlier. Before its acquisition, World Color had been one of the industry's most active consolidators. Among the companies it had acquired earlier in the year were: Providence, RI-based UP/Graphics; Erlanger, KY-based Metroweb Corp.; Great Western Publishing in Phoenix; Waukee, IA-based Downey Printing Group; and Enfield, CT-based Infiniti Graphics.
But there were so many other deals. Another major gulp was heard when New York-based Applied Graphics Technologies (AGT), having outbid Schawk Inc., acquired London-based prepress provider Wace Group plc.
While Lisle, IL-based Wallace Computer Services spent most of 1999 trying to smooth out its operations (following its 1998 acquisition of Graphic Industries) it took time out to sell two of its operations: Memphis, TN-based Mercury Printing (to Consolidated Graphics) and its $40 million contract stationery business (to Boise Cascade Office Products). But in the third quarter, Wallace returned to its acquisition course, acquiring San Diego-based Commercial Press.
Lake Forest, IL-based Moore Corp., in the midst of a reorganization, formed a strategic alliance with Edmonton, Canada-based Quality Color Press, a print management firm, and entered into an agreement with Applied Printing Technologies (APT), under which APT became Moore's preferred provider for commercial printing services for the Northeastern United States. Moore also sold off its Honesdale, PA, forms manufacturing facility to Distributor Stock Forms.
Two major industry players got new ownership in 1999: One was Merrill Corp., the St. Paul, MN-based document and information management company. A subsidiary of DLJ Merchant Banking Partners announced that it would purchase Merrill, buy back all of its stock and take the company private. Earlier in the year, Merrill acquired substantially all the assets of Plymouth, MN-based Alternatives Communications Group.
The other company with new ownership is New York-based Big Flower Holdings, which reached a deal with two large capital companies that gave it $1.9 billion in re-capitalization. Under the deal, Big Flower Holdings was absorbed by BFH Merger Corp., an entity formed by Thomas H. Lee Co. and Evercore Capital Partners.
Montreal-based GTC Transcontinental Group made news in 1999 by making a major (physical) move into the United States. It is building an 80,000-square-foot printing plant designed for direct marketing in Dayton, OH, near Transcontinental's existing flyer printing plant.
Menasha, WI-based Banta Corp. expanded its influence south of the border by acquiring partial ownership of Chilean printer Morgan Impresores S.A. and by forming a joint venture with Grupo Imagen, a sheetfed printer based in Queretaro, Mexico.
One of 1999's ongoing stories was Richmond, VA-based Cadmus Communications, as it went through a series of changes. It sold its Charlotte, NC-based financial communications business to R.R. Donnelley & Sons, and its Custom Publishing business to Pohly & Partners, a Boston-based relationship marketing company. In addition, Cadmus' advertising group, CadmusCom, was consolidated into the company's Atlanta advertising operation.
But then Cadmus moved to grow again, acquiring the Easton, PA-based Mack Printing Group, a $165 million producer of journals, magazines and periodicals.
Waterloo, WI-based Perry Judd's had a fairly quiet year, but it did acquire the commercial printing operations of Spencer, IA-based Heartland Press.
The vast majority of the gulping and gobbling came from the growing cadre of "roll-up" companies, whose primary mission is to consolidate the commercial printing industry. Here's a rundown of some of the prominent acquisitions by each.
Memphis, TN-based Master Graphics continued to acquire companies during the first half of the year, including Thomasson Printing of Carollton, GA, Phoenix-based Woods Lithographics, Chicago-based Columbia Graphics and Indianapolis-based White Arts. But toward the end of the year, with about 20 companies in its system, Master's pace of acquisitions slowed, and it has reported losses for recent quarters.
Among Houston-based Nationwide Graphics' acquisitions this year were: Graphics West of Las Vegas; Lasertech Graphic Services of Miami; Offset Atlanta; Valdosta, GA-based US Press; Miami-based H&D Graphics; and Page/International Communications in Houston.
There were new consolidators on the scene this year, as well. One was New York-based Integrated Graphics (IGI), which bought seven graphic arts, printing and digital output service facilities in the New York City/Long Island, NY, region, along with Houston-based Emmott-Walker, International Color Services of Phoenix and Ronkonkoma, NY-based Lithographic Communications.
Jersey City, NJ-based Cunningham Graphics International continued to add to its stable of companies, with acquisitions that included Bengal Graphics, located in "printer's row" on Varick Street in New York City; Toronto-based Griffin House Graphics; Boston-based Boston Towne Press; Apollo (UK) Ltd. of the Canary Wharf section of London; MVP Graphics in Santa Fe Springs, CA; San Francisco-based Colorfast Printing; and D&L Graphics in Hawthorne, NJ.
Houston-based Consolidated Graphics showed no sign of slowing its pace. Among the companies it added to its system this year are: Chicago-based CMI; Wentworth Printing of Columbia, SC; Milwaukee-based The Printery; Westland Printers of Baltimore; Los Angeles-based Apple Graphics; Multiple Images Printing of Chicago; T/O Printing of Westlake Village, CA; Philadelphia-based Piccari Press; Byrum Lithographing in Columbus, OH; and Keys Printing in Greenville, SC.
Printing Arts America (PAA), based in Westport, CT, had a busy year, acquiring George Lithograph in San Francisco; Bay State Press in Framingham, MA; Tarrant/Dallas Printing; and Original Impressions of Miami. In the third quarter, Terry Tevis, president and CEO of PAA, submitted his resignation to the company's board of directors and then took a position with R.R. Donnelley & Sons.
Englewood, CO-based Mail-Well had a few acquisitions to add to its list this year, including Houston-based Hill Graphics (also known as Champagne Fine Printing); Colorhouse Inc., a prepress company in the Minneapolis area; Sidney, OH-based Direct Graphics; and Enterprise Press of New York City.
The newest kid on the roll-up block in 1999 was San Francisco-based Kelmscott Communications LLC, which acquired Watermark Press in San Francisco; Printing Control in Seattle; Commercial Printing/CDS in Medford, OR; and Kansas City, KS-based Spangler Printers.
Chicago-based Global Docu-GraphiX was quieter this year, but did add Jackson, TN-based Dugger Business Forms to its operation.
To add to the mix, there were also literally dozens of mergers and acquisitions that took place among the small- and mid-sized companies.
Perhaps the most disheartening story of the year was that of American Banknote and its former subsidiary, American Bank Note Holographics. Both companies spent the year dealing with a class-action lawsuit by shareholders that alleged violations of the federal securities laws after American Bank Note Holographics was forced to revise financial statements for 1996, 1997 and the first three quarters of 1998. American Banknote stock lost 95 percent of its value and was withdrawn from the New York Stock Exchange.
But, to put all the ups and downs of the year into perspective, it is worthwhile to note that Johannes Gutenberg, who invented the printing press in the mid-1400s, was named "Person of the Millennium" in the book "1,000 Years, 1,000 People: Ranking the Men and Women Who Shaped the Millennium."
Despite worries that may have arisen recently on Wall Street about the stability of the industry, Harris DeWese, investment banker to the printing industry, sees the problems as temporary and has high hopes for the industry Gutenberg created.
"Although some roll-up consolidators experienced integration problems, these missteps were management-related and not related to some underlying industry weakness," he notes. "The printing industry is strong and, contrary to a perceived threat, is actually experiencing new growth from the e-commerce companies."
Far from being worried about the industry's stability, DeWese believes that "given the great job these men are doing to create value for their shareholders, their stocks seem under-valued. I look for consolidation to continue at a high level, with the buyers focused on top-quality target sellers."
