Tuesday, August 7, 2018

If you Can’t Beat ’em, Join ’em - July 2018 M&A Activity

LSC Communications, easily the most active company on our deal log since LSC’s formation in 2016, announced an equity investment in MAZ Systems. The acquired company is a “content logistics” company that has created a cloud-based software system that delivers articles, video, images, and audio to a multitude of content-delivery platforms including Apple iOS, Android, Apple TV, Roku, Amazon Fire, Apple News, Twitter, Amazon Alexa, LinkedIn, Slack, Xbox, YouTube, Vimeo, and others. The software navigates the programming nuances required by each digital platform. The content creator (publisher, brand, media provider or organization) is freed up to do what it does best, create original content. As new platforms emerge, the MAZ folks program the new pathways and connections; customers are relieved of the cost and complexity of keeping up with all these digital channels. 

As a printer of many publications, a position that LSC reinforced in September 2017 with its acquisition of Publishers Press, LSC is certainly affected by the digital headwinds facing publishers. Those digital forces are driving down both paid circulation numbers and ad page counts. Those seemingly relentless dynamics directly equate to press runs of fewer pages and lower quantities. In an attempt to explain how it makes sense to help its clients deliver content electronically via the expanding multitude of digital channels, LSC’s new President of Business Development stated, “LSC will harness MAZ’s technology to complement and expand its legacy platform to expose clients to new distribution solutions that help streamline and accelerate their business strategies beyond print.”

I must admit that I’m tempted to be enthusiastic when I see a printing company invest in ancillary services that create “value-added” around the core deliverable printed product. Examples of these acquisitions abound in our industry. Commercial printers acquire mailing services firms; high-volume printers build out sophisticated commingling operations and acquire logistics companies to drive down postal and delivery costs for their clients; commercial printers swim upstream into creative offerings; transactional printers establish highly secure facilities and compliance procedures to maintain data integrity; direct mail printers seek to establish closed-loop data analytics to prove and improve the effectiveness of their clients’ direct mail campaigns; offset printers acquire a wide-format shop – you get the point. Printing companies are using acquisitions to redefine their place in the market by expanding into adjacent services.

Some commercial printing companies have successfully navigated the transformation to become true Marketing Service Providers. Otherwise known as “MSPs,” these companies provide a full range of competencies, including ideation, creative and graphic design, website development and maintenance, campaign management, social media marketing, and yes, there is even print in the mix! In many cases, the printed messages are still a core component of the marketing campaign and often remain the primary revenue driver for the company.

Back in 2013, Brown Printing acquired Nellymoser, an innovator in mobile and print-to-digital campaigns that served the same advertisers that placed ads in the magazines printed by Brown (see The Target Report - Is the Printing Industry Devolving or Evolving? – March 2013). At the time, there was lots of excitement around the ideas of QR codes, augmented reality (“AR”) and NFC (near-field communication). All these technologies were designed to connect a printed page to a webpage on a digital device, usually a smart phone. By helping publishers use print to drive webpage traffic, or so the theory went, Brown (and other printers) were adding value to the print proposition that was their core competency and deliverable. Despite the apparent game-changing acquisition of a leading-edge mobile technology company, a year and month later, Brown Printing was acquired by Quad/Graphics at what appeared to be a bargain-basement price (see The Target Report - A Tale of Two Cities, the Best of Multiples, the Worst of Multiples – April 2014).

As LSC invests in the new digital content technology, it has continued to rationalize and divest non-core print operations. In July, the company announced the sale of its European print operations to the UK-based Walstead Group, a private equity-backed printing roll-up with trailing revenues of approximately $796 million. The business transferred from LSC to Walstead represents printing revenues of about $250 million and a reduction in LSC’s projected EBITDA of approximately $12 million.

A year ago, LSC made an equity investment in Authors, a software company that uses artificial intelligence to analyze editorial content (see The Target Report - Transformation and Rebirth – July 2017). That investment, and the recently announced deal with MAZ Systems, are clearly aimed at acquiring the next wave of content-related digital technology to serve the company’s publishing customers. The question remains; does the acquisition of software that automates editorial functions and enables efficient content distribution via digital channels support and drive core print operations? Or does the onslaught of digital publishing technology continue to eat away at high-volume publication printers, despite their best efforts to acquire and implement these technologies?

Packaging - Labels

Fortis Solutions Group, a serial acquirer in the label segment, announced its latest deal, the purchase of Lewis Label Products in Forth Worth, Texas. The acquired company manufactures pressure sensitive labels, shrink sleeves and flexible packaging. Backed by Main Post Partners since 2017, the company now has over 400 employees with locations in seven states.

Resource Label Group, a portfolio company of First Atlantic Capital and TPG Growth, acquired Ingenious Packaging in Toronto. Ingenious produces pressure sensitive labels and shrink sleeves for a wide variety of consumer products. Formerly part of Tapp Label, the Toronto operation was spun off and renamed “Ingenious” when G3 Enterprises, the investment arm of the third generation of Gallo winemaking family, acquired Tapp’s Oregon and California plants which mostly produced labels for the wine industry. This latest acquisition brings Resource Label Group’s locations to fifteen and is the company’s first in Canada.

Inovar Packaging Group, headquartered in Dallas, picked up Topp Labels in Miami and announced plans to tuck the acquired company into its existing location in Fort Lauderdale, Florida. Inovar was acquired by AEA Investors in January 2016 and later that year announced a triple-play acquisition of three label printing companies (see Private Equity LOVES Labels – August 2016). Inovar followed that deal shortly thereafter with the acquisition of LabelPrint America in Newburyport, Massachusetts.

Sun Solutions (formerly Sun Printing), a diversified commercial printing operation in West Columbia, South Carolina, acquired its first company in the packaging segment with the purchase of Graphic Label Solutions in Columbia, Tennessee. The company also owns Consolidated Mailing Services, a full service lettershop with commingling capacity
.


2018 July - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries  

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenues
($Mil )


Party #1 Address


Deal Party #2
Pre-Deal
Revenues
($Mil )


Party #2 Address
Date
Deal
Public
Deal
Value
($Mil)

Deal Structure
(Intermediary)


Notes

Press
Release
LSC Communications $3,710 Chicago, IL MAZ Systems No Data New York, NY 7/31/18 No Data Equity Investment Content logistics Link
Sun Solutions No Data West Columbia, SC Graphic Label Solutions No Data Columbia, TN 7/31/18 No Data Acquisition Label printing Link
Resource Label Group
(Port co. First Atlantic Capital)
No Data Memphis, TN Ingenious Packaging
(ne’ Tapp Label)
No Data Toronto, ON 7/31/18 No Data Acquisition Label & sleeve printing Link
Minuteman Press Longwood No Data Longwood, FL Metrovista No Data Longwood, FL 7/31/18 No Data Acquisition Marketing services Link
Mac Papers No Data Jacksonville, FL Wilkerson Packaging  No Data Atlanta, GA 7/30/18 No Data Acquisition Paper distribution Link
RFB Enterprises
(Reade Brower)
No Data Camden, ME Maine Titles (2) No Data Ellsworth, ME 7/25/18 No Data Acquisition Community newspapers Link
Inovar Packaging Group
(Port co. AEA Investors)
No Data Dallas, TX Topp Labels No Data Miami, FL 7/24/18 No Data Acquisition Labels & flexible packaging Link
Ahlstrom-Munksjö $2,609 Stockholm, Sweden Expera Specialty Solutions No Data Kaukauna, WI 7/23/18 $614.6 Acquisition Specialty papers Link
WhatTheyThink No Data Lexington, KY Printing News Group No Data Fort Pierce, FL 7/23/18 No Data Merger Industry publications Link
Walstead Group
(Port co. Rutland Partners)
$796.5 London, UK European print operations
(Div. LSC Communications)
$250.0
($3,710)
Chicago, IL 7/19/18 $60.0 Acquisition Web printing operations Link
Mudlick Mail
(Port co. Clearview Capital)
No Data Acworth, GA Muscle Up Marketing No Data Alpharetta, GA 7/19/18 No Data Acquisition Niche marketing services Link
Esko
(Sub. Danaher)
No Data Ghent, Belgium BLUE Software
(Port co. Diversis Capital)
No Data Chicago, IL 7/18/18 No Data Acquisition Brand management software Link
Ennis $369.0 Midlothian, TX  Wright Business Graphics $58.0 Portland, OR 7/17/18 No Data Acquisition Business forms & direct mail Link
Fortis Solutions Group
(Port co. Main Post Partners)
No Data Virginia Beach, VA Lewis Label Products No Data Fort Worth, TX 7/12/18 No Data Acquisition Labels & flexible packaging Link
Kelley Holmes No Data Fort Pierce, FL Printing News (and other titles)
(Prop. Endeavor Business Media)
No Data Nashville, TN 7/11/18 No Data Acquisition Industry publications Link
Modern Litho No Data Jefferson City, MO James Printing No Data N Kansas City, MO 7/9/18 No Data Acquisition Commercial printing Link
Berwind No Data Philadelphia, PA Maxcess
(Port co. Bertram Capital)
No Data Oklahoma City, OK 7/3/18 No Data Acquisition Web rollers & accessories Link
Case Paper No Data Harrison, NY WinterBell Converting No Data High Point, NC 7/2/18 No Data Acquisition Paperboard converting Link


2018 July - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenues
($Mil )



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
Diverse Label Printing, LLC 7/23/18 No Data 18-10792 Burlington, NC 4th Middle NC
Greensboro
Catharine R. Aron John A. Northen  Label printing
Chapter 7 Filings:
Kernwood Forbes Press, Inc. 7/23/18 No Data 18-12805 Malden, MA 1st Massachusetts
Boston
Joan N. Feeney Jordan L. Shapiro  Commercial printing
Altman Printing Company, Inc. 7/12/18 No Data 18-03531 Spartanburg, SC 4th South Carolina
Columbia
Helen E. Burris Randy A. Skinner Commercial printing


2018 July - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenues
($Mil )



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
Guynes Printing 8/29/19 No Data El Paso, TX Boutwell, Owens and Co Fitchburg, MA Jul-18 Commercial and packaging printing Link
Printing facility 8/22/18 No Data New Haven, CT Knights of Columbus New Haven, CT Jul-18 Publication printing Link
Business Printing 8/14/18 No Data Carrollton, TX None N/A Jul-18 Commercial printing Link

Saturday, July 7, 2018

What Did Not Happen - June 2018 M&A Activity


There was a marked decline in transactional activity in June in the printing, packaging and related industry segments. There are many possible reasons why reported M&A activity was down for the month: buyers or sellers were preparing for summer vacation and put off closing their deals, lenders delayed funding as interest rates ticked up, or market participants simply chose to not publicize a transaction.*

Even more notable than the dearth of deals was the number of significant plant closures announced last month. Edwards Brothers Malloy, headquartered in Ann Arbor, Michigan, announced the sudden and unexpected shutdown of their extensive book printing operations, closing down completely only two weeks after the announcement. The abrupt decision reportedly was driven by the company’s inability to secure replacement funding or find a buyer for the company after its current lender reduced the company’s credit line.

While management stated that the core problem was a $10 million settlement reached in 2016 to fund a legacy pension liability, we suspect that if the company was otherwise healthy, with reported revenues of $80 million in 2017, a solution could have been devised. Revenues have been declining steadily every year since Edwards Brothers and Malloy merged back in 2012. At the time, the two book printing companies reported that their combined revenues were $115 million. As recently as this past February, the company announced the closure of its offset printing facility in Lillington, North Carolina without a hint that the final end was near.

Lest the reader of The Target Report think that the demise of Edwards Brothers Malloy presages the decline of the printed book, there are plenty of available statistics that indicate that the number of printed books sold in the US has rebounded from its low in 2012, albeit slightly. What has changed dramatically is how they are sold (online) and increasingly how books are printed (digitally and on-demand).

It was reported that before deciding to close up shop, Edwards Brothers Malloy was negotiating to sell the company’s digital printing divisions which, if carved out, was a $16 million business. The buyer in the failed negotiations was Minnesota-based CJK Group, a very active acquirer in the book printing segment. Apparently, whatever was on the table was insufficient to convince the company’s lender to play along, and the decision was made that liquidation was the best path for maximum recovery.

The CJK Group has been bullish on the book printing business. The company has its roots in Bang Printing, a book printer in Brainerd, Minnesota. After a series of acquisitions of companies with core competency in book printing, Bang was rebranded at the holding company level as the CJK Group. The holding company acquired Webcrafters in Madison, Wisconsin in December 2017. The purchase of Webcrafters was the second major acquisition for the CJK Group last year when it also acquired The Sheridan Group (see The Target Report – Legacy Printing Companies Fade Into History).

Another industry consolidator focused on the book printing segment is the newly minted Printing Consolidation Company, backed by private equity sponsor Blackford Capital in Grand Rapids, Michigan. In November 2017, Blackford acquired book binding and fulfillment specialist company Kingsport Book which complements the fund’s prior investment in Dickinson Press, a printer of religious, educational and business books. Printing Consolidation Company’s CEO is on the hunt for additional acquisitions in the book printing segment, stating “the book printing space in the US is a great market for consolidation.”

Company & Plant Closures

Kappa Printing Management Associates announced the closure of the Vanguard Graphics printing company, located just outside of Ithaca, New York. The 200,000 SF facility houses a heatset web and sheetfed offset production company that specializes in catalogs, magazines, digest-size booklets, calendars and other commercial printed products. Kappa acquired the company in April 2016 (see The Target Report – A Puzzling Future for Specialty Magazines). The company is scheduled to cease operations at the end of September.

No reason was given publicly for the closure of Vanguard, and Kappa remains a player in the printing industry, with plants in Wisconsin, Indiana and Pennsylvania. The firm’s most recent acquisition, Times Printing, in Random Lakes, Wisconsin, was acquired only one month after the Vanguard acquisition.

Concord Direct, which runs four heatset web presses churning out high volumes of direct mail solicitations has announced the complete closure of its web printing operations. The company made the decision after its major customer, reportedly Publishers Clearing House which represents two thirds of Concord Direct’s printing business, announced that it would be moving its printing to a Midwest printer. Concord Direct will continue operations at its facility in Concord, New Hampshire with its newly added inkjet press, focusing on smaller, targeted print runs.

Mimeo announced the closure of its printing facility in Newark, New Jersey, purportedly due to the high tax rates in the Garden State. Mimeo plans to move the production to a location that is more favorable to business, possibly adding to its existing facility in Memphis or starting up a printing facility elsewhere in response to tax incentives.

Initially a symbol of Newark’s renaissance, the opening of the Mimeo printing plant in 2008 was attended by aspiring presidential candidate US Senator Cory Booker, at that time the Mayor of Newark. Mimeo was an early mover in the online on-demand cloud-based print segment, with all-digital printing production, manufactured in centralized plants located near major shipping hubs. The company has attracted HP and Goldman Sachs as investors, among others, and now reports over $100 million in revenues.

While one month does not yet indicate a compelling and clear trend, the lack of robust positive M&A activity in June, combined with multiple significant closures, may be the warning shot over the bow that significant consolidation and industry contraction is in store just over the horizon.


* e.g. Graphic Arts Advisors advised a seller in a transaction that closed in June, however, the buyer has requested that the transaction not be publicized at this time.


2018 June - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries  

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenues
($Mil )


Party #1 Address


Deal Party #2
Pre-Deal
Revenues
($Mil )


Party #2 Address
Date
Deal
Public
Deal
Value
($Mil)

Deal Structure
(Intermediary)


Notes

Press
Release
Tekni-Plex No Data Wayne, PA Oracle Healthcare Packaging
(Port co. Centre Lane Partners)
No Data Winston-Salem, NC 6/19/18 No Data Acquisition Specialty flexible packaging Link
Vomela $237.0 St. Paul, MN Palmer Printing No Data Chicago, IL 6/19/18 No Data Acquisition Commercial printing Link
Mark Andy No Data Chesterfield, MO Brandtjen & Kluge No Data St. Croix Falls, WI 6/18/18 No Data Acquisition Finishing equipment Link
American Media No Data New York, NY In Touch (and other titles)
(Prop. Bauer Publications)
No Data Englewood Cliffs, NJ 6/15/18 $80.0 Acquisition Magazine publishing Link
Graphic Packaging $4,820 Atlanta, GA PFP No Data Lebanon, TN 6/12/18 No Data Acquisition Diecut paper products Link
Repacorp No Data Tipp City, OH Hooven-Dayton No Data Miamisburg, OH 6/11/18 No Data Acquisition Labels & flexible packaging Link
InComm
(Port co. Warburg Pincus)
No Data Atlanta, GA Gift Card Impressions No Data Kansas City, MO 6/5/18 No Data Acquisition Prepaid gift card marketing Link
BW Paper Systems
(sub. Barry-Wehmiller)
No Data Phillips, WI K&H Machinery No Data Dongguan, China 6/4/18 No Data Acquisition Corrugating machinery Link


2018 June - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenues
($Mil )



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
Great Atlantic Graphics, Inc. 6/29/18 No Data 18-14384 Lansdale, PA 3rd Eastern PA
Philadelphia
Ashely M. Chan Albert A. Ciardi, III Commercial printing
Dragonfly Graphics, Inc. 6/12/18 No Data 18-10155 Gainesville, FL 11th Northern FL
Tallahassee
Karen K. Specie Lisa Caryl Cohen  Screen & wide format printing
Glover Corporation, Inc. 6/1/18 No Data 18-02770 Raleigh, NC 4th Eastern NC
Raleigh
Joseph N. Callaway John Paul Cournoyer Commercial printing
Chapter 7 Filings:
Evanston Sign and Graphics, Inc 6/13/18 No Data 18-16833 Chicago, IL 7th Northern IL
Chicago
LaShonda A. Hunt David P Leibowitz Signage
Insolvency Filings:
Zanders
(Port co. Mutares AG)
6/28/18 No Data 75 IN 232/18 Bergisch Gladbach
Germany
Cologne District
Court, Germany
N/A Dr. Marc d'Avoine Printing papers


2018 June - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenues
($Mil )



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
Vanguard Graphics
(Div. Kappa Media)
9/29/18 No Data Dryden, NY Kappa Printing Management Fort Washington, PA 6/29/18 Commercial printing Link
Concord Direct - Web Printing Facility Sep-18 $42.0 Concord, NH None N/A 6/26/18 Direct mail printing Link
Rose Printing Company 7/26/18 No Data Tallahassee, FL None N/A Jun-18 Book printing Link
Acme Bookbinding 6/13/18 No Data Boston, MA None N/A Jun-18 Book binding Link
Mimeo - Printing Facility 7/7/18 No Data Newark, NJ Mimeo New York 6/4/18 Moving operations to Memphis, TN Link
Edwards Brothers Malloy 6/15/18 $95.0 Ann Arbor, MI None N/A 6/1/18 Book printing Link