Monday, January 6, 2020

The Penguin’s Native Tongue is Now German – December 2019 M&A Activity


Bertelsmann, the massive media company based in Germany, has announced that it will soon become the sole owner of Penguin Random House. Upon approval by regulators, which is expected, the company will purchase the remaining 25-percent of the joint-venture now owned by Pearson, the UK-based publisher that is shedding non-educational assets. Penguin, owned by Pearson, and Random House, owned by Bertelsmann, came together in 2013 to form the world’s largest book publishing group, bringing many familiar names under one roof. Much of the publishing industry had been in continuous “roll-up” mode for decades, similar to the printing industry; the joint-venture was one more continuation of that process. Previous acquisitions on both sides of the joint venture included well-known and respected publishing houses including Doubleday, Modern Library, Alfred A. Knopf, Pantheon, Ballantine Books, Bantam, Dell, and many others. 

One of the most famous and historic trade names of the combined entity was Penguin, surviving the latest merger and still enshrined on the company marquee, slated to remain the lead name in the new wholly-owned subsidiary of the Bertelsmann publishing division. The new entity will, amazingly, consist of more than 300 different brands or “imprints” under which the company publishes books. Similar to how the Volkswagen, Audi, Porsche and Bentley brands are all manufactured by one company but target different customers, all 300 imprints will be published under the overarching Bertelsmann umbrella, but marketed to different audiences and demographic segments. Like the VW Beetle, the Penguin imprint got its start in the 1930’s and was conceived as a low-cost alternative to traditional methods, effectively accomplishing its intended function, but priced to be affordable to the masses.

Penguin founder Sir Allen Lane had publishing in his blood. He rose quickly from apprentice to the position of managing editor at his uncle’s publishing company. Sir Allen took risks; he was the first to publish James Joyce’s highly controversial Ulysses in England (much later in life, taking another risk, he purposely published an uncensored edition of D.H. Lawrence’s Lady Chatterley’s Lover just to test the censorship laws in England). In 1934, when traveling back from a weekend visit with mystery writer Agatha Christie at her country home, he found himself without something to read and was aghast that the only reading material available at the train station were magazines and reprints of Victorian novels. Hence, the idea was born for inexpensive editions of quality literature, sold in vending machines and at non-traditional outlets for books such as tobacco stores and, of course, railway stations. Sir Allen priced the original editions equal to a pack of cigarettes, so low that some authors, including George Orwell, took it upon themselves to protest the idea which they believed would undermine the market for books.

The idea was not new, however. Several years before, a German company had established Albatross Books in Hamburg based on the same ideal of publishing inexpensive paperback versions of quality literature. Not only did Sir Allen adopt the use of a bird as the brand name and the logo, his books, like the German predecessor, were sized to approximate the proportions of the golden ratio, used modern sans-serif fonts, and eschewed the use of illustrations on the covers favoring instead simple graphic treatment with typography and color-coded by genre.


Dancing Penguin from 1938
The idea took off and eventually other publishers and authors agreed to sell Penguin the rights to publish an inexpensive paperback edition of their titles under the Penguin imprint. Penguin titles were primarily focused on great fiction (best-known for the orange banded covers) but also included crime novels (green), travel and adventure (pink), biographies (dark blue), drama (red), essays (purple), miscellaneous (yellow) and world affairs (grey). The success of the Penguin brand was followed up by Pelican Books (light blue) which published non-fiction titles, and then by Puffin Books for children. The original name for the brand was suggested by a typist listening in on Sir Allen’s conversation. He then sent a young staff member off to the London Zoo to draw the original Penguin logo. The logo morphed over the years, sometimes upright and stiff, other times happily dancing. Occasionally, the book was embellished with a pair of back-to-back dancing penguins, for reasons that are no longer obvious or explained.

According to recent reports, it appears that the market for printed books has stabilized, or at worst, is declining only slightly. Print, at least when it comes to books, is not dead, nor is the printed book on life support as appears to be the case for many newspapers and magazines. To support its commitment to printed communications, especially books, Bertelsmann’s subsidiary Bertelsmann Printing Group maintains a global staff in excess of 8,200 employees, with more than 20 manufacturing sites in Europe and the U.S. If it were a standalone company, the Bertelsmann Printing Group would be the largest printing company in Europe. On a global basis the company’s revenue is approximately $1.8 billion annually.

In the U.S., Bertelsmann has acquired several companies and operates plants that specialize in book printing and related services. Berryville Graphics, in Virginia, operates a highly automated hardcover and softcover book manufacturing facility. Coral Graphics, located on Long Island, New York, with additional facilities in Virginia and Kentucky, prints highly decorated book components including book covers, jackets and inserts. Offset Paperback Manufacturers (OPM), located in northeast Pennsylvania, produces several hundred million paperbacks each year. The U.S. operations combined employ 1,300 with revenues in excess of $230 million.

It’s been 88 years since two Germans and an Englishman launched the predecessor concept to Penguin Books in Hamburg. Through the vicissitudes of world events, Albatross Books was eventually shuttered and one of its founders emigrated to America and eventually headed up Penguin Books in the U.S., the successor to his own original concept. Later this year, the world’s leading company that produces inexpensive books produced for the masses goes home to roost in Germany.

Commercial Printing and Diversified Services

Walsworth, with reported revenues just shy of $180 million and based in Marceline, Missouri, announced the acquisition of Ripon Printers, located in Wisconsin. More than half of Walworth’s business is book manufacturing with a specialty in the production of yearbooks. The company also prints magazines, catalogs and general commercial work. With revenues of $50 million, the Ripon acquisition significantly moves the needle for Walsworth and brings additional catalog and magazine work to the mix, as well as direct mail and fulfillment services.

Print Management Services

Another global private equity investment firm has entered the marketing execution services business, suggesting that at least this firm of financial investors believes there is still more margin to squeeze out of suppliers in the marketing services supply chain. This time Blackstone, the third largest private equity firm in the world, has acquired a substantial minority interest in HH Global, the UK-based procurement and creative production company. Lest sellers of graphic communication products have any doubt about HH Global’s core deliverable, the company’s website makes it clear; their services, in order, are print procurement, point-of-sale procurement, packaging procurement, and promotional products procurement. Procurement.

Blackstone’s investment follows the acquisition of Williams Lea Tag by Advent International in 2017, now the tenth largest global private equity fund (See The Target Report: August 2017, Williams Lea Tag is on the Move). We expect that private equity’s entry into the mix portends even more competitive pricing pressure on suppliers when these print management service companies come knocking.



2019 December - 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
Sonoma Media Investments No Data Santa Rosa, CA Sonoma County Gazette $0.5 Forestville, CA 12/27/19 No Data Acquisition Community newspaper Link
Taylor Printing Group No Data Fredericton, NB Bounty Print (Nova Scotia Ops)
(Div. SaltWire Network)
No Data Halifax, NS 12/19/19 No Data Acquisition Commercial printing Link
Walsworth $179.3 Marceline, MO Ripon Printers $50.0 Ripon, WI 12/18/19 No Data Acquisition Commercial printing Link
Delta Media Group
(Affil. O'Rourke Media Group)
No Data Kiel, WI Ripon Commonwealth Press No Data Ripon, WI 12/18/19 No Data Acquisition Community newspaper Link
Bertelsmann $19,600 G├╝tersloh, Germany Penguin Random House No Data New York, NY 12/18/19 $675.0 Buyout of Minority Book publisher Link
The Daily Gazette No Data Schenectady, NY The Recorder
(Prop. McClary Media)
No Data Amsterdam, NY 12/16/19 No Data Acquisition Community newspaper Link
Greg Ellison No Data Denver, CO SpeedPro Denver No Data Denver, CO 12/13/19 No Data Acquisition Wide format franchise Link
Fineline Technologies
(Port co. Summit Partners)
$110.0 Norcross, GA Consolidated Printing No Data Van Buren, AR 12/12/19 No Data Acquisition Ticket printing Link
Palm Beach Media Group
(Sub. Hour Media Group)
No Data Troy, MI Gulfstream Media Group No Data Ft. Lauderdale, FL 12/11/19 No Data Acquisition Magazine publisher Link
Tenex Capital Management No Data New York, NY Orbus Exhibit & Display Group No Data Woodbridge, IL 12/5/19 No Data Acquisition Trade show displays Link
Blackstone No Data New York, NY HH Global No Data London, UK 12/3/19 No Data Minority Interest Marketing execution services Link
Bloom Family Sir Speedy No Data Westbury, NY BigTime Designs No Data Hauppauge, NY 12/1/19 No Data Acquisition Wide format printing Link


2019 December - 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:
Print Mates, Inc.
(Div. Generation Next Franchise Brands, Inc.)
12--15-19 No Data 19-17923 San Diego, CA 9th Nevada
Las Vegas
Mike K. Nakagawa Matthew C. Zirzow Photobooks & photo products
G&A Label, Inc. 12/4/19 No Data 19-32013 El Paso, TX 5th Western TX
El Paso
H. Christopher Mott Carlos A. Miranda Label printing
Chapter 7 Filings:
Octagon Graphics, LLC 12/11/19 No Data 19-11687 Safety Harbor, FL 11th Middle FL
Tampa
Michael G. Williamson  Kevin A. Comer Wide format digital & screen printing
Chapter 15 Filings:
Lecta Paper UK, Ltd. 12/19/19 19-13990 Barcelona, Spain 2nd Southern NY
New York City
Michael E. Wiles  Robert H. Trust Pressure sensitive papers


2019 December - 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
Ten Publishing Dec-19 No Data El Segundo, CA N/A None 12/6/19 Closing 19 automotive titles Link

Saturday, December 7, 2019

Commercial Printing: Consolidation or Regional Expansion? – November 2019 M&A Activity


Three out of every four transactions in the commercial printing business are structured as a “tuck-in.” The buyer folds the acquired customers into their existing production capacity, hires selected qualified employees, with special focus on those people that touch the customer, and maybe cherry-picks some of the equipment. The seller is left to close up shop, sell off the remaining equipment and wind-down the business entity.

What about the one out of four transactions that is not a tuck-in? Is another trend emerging in the consolidating commercial printing segment?

Mittera Group, the Iowa-based commercial printing juggernaut, acquired the business assets of Chicagoland commercial printer Fuse. Mittera is now the most active consolidator in the commercial printing segment and arguably the only player on the national stage since the heady days when CGX and Mail-Well, fueled by debt and public stock, were competing to build out national multi-location commercial print production platforms. Privately held Mittera is now a “roll-up of roll-ups,” snapping up smaller consolidators when they become available for purchase. (See The Target Report: December 2018, Consolidation in Commercial Printing Rolls On).

Fuse was the mini roll-up comprised of the former Kelmscott Communications, Rider Dickerson and Buhl Press. The three companies were mashed together in 2016 with reported combined revenues of $40 million. As is the case with seventy-five percent of all acquisitions in the commercial printing business, the driving logic behind the creation of Fuse was the consolidation of the operations of all three companies. After a build-out of the Buhl Press facility in Berkeley, Illinois, the other two production facilities were shuttered and the business “tucked-in” under one roof. The Fuse roll-up rolled onward in 2018 with the acquisition of Digital Hub, but then stalled. Now Fuse has itself become the acquisition target of the much larger Mittera.

However, the Fuse deal is different than the great majority of acquisitions that we list in The Target Report in the commercial printing segment in which the acquired facility is closed. In this case, Mittera has announced plans to continue operating in the Fuse facility. According to the new president of the Fuse business, now rebadged Mittera Chicago, the company is committed to “grow our Chicagoland presence,” indicating that the acquisition of Fuse will not be another closure and tuck-in. Rather, the deal represents a regional expansion of Mittera’s production footprint.

Knepper Press, the diversified printing services company located adjacent to the Pittsburgh International Airport, purchased Dual Print & Mail in upstate New York.* Dual Print & Mail was formerly owned by digital direct mail printer Compu-Mail which had acquired the troubled web and sheetfed printer in 2014. Compu-Mail’s goal was to secure a reliable local source for offset printing that was adjunctive to its core digital direct mail business. After effecting a turnaround of Dual Print & Mail, Compu-Mail decided to exit the offset business.

In what turned out to be fortuitous timing for Dual Print & Mail, Knepper Press had earlier this year acquired TBN, the commercial printing business of The Buffalo News. The acquisition of TBN was a strategic move to reach into the Buffalo, New York region. (See The Target Report: April 2019, Commercial Printing and Convergence of Diversified Services). Operating from its secure position in the Pittsburgh market, Knepper’s next step was to acquire a production facility in the upstate New York region to support and augment the newly acquired TBN business. The acquisition of Dual Print & Mail cements the regional expansion strategy and brings a second fully equipped web and sheetfed offset facility under Knepper’s ownership and management.

Knepper Press and Dual Print & Mail will continue to operate as separate stand-alone facilities, sharing resources and seeking to achieve increased efficiencies across a multi-plant production platform. Unlike Mittera, Knepper’s plan does not appear to be part of a larger roll-up strategy, rather the acquisition was a strategic expansion into another metropolitan region that is within a reasonable driving distance from the company’s core market. But, at least in one respect, Knepper’s purchase of Dual Print & Mail is similar to the Mittera acquisition of Fuse; unlike the majority of deals in commercial printing; the plants in these two cases will continue to operate.

A similar expansion strategy has been methodically executed by Drummond, a commercial printing and graphic services company headquartered in Jacksonville, Florida. Through a series of acquisitions, beginning in 2012, Drummond has built out a considerable commercial printing presence in the greater Atlanta, Georgia metropolitan area. While some of the Drummond acquisitions have been consolidated into a unified production platform via classic “tuck-in” transactions, the company has clearly committed to building a permanent presence in the Atlanta market while maintaining their original Florida operation. Most recently, Drummond acquired PSP Retail with 90,000 square feet of production space in Decatur, Georgia. The acquired company produces in-store graphics and signage. According to the CEO of Drummond, the acquisition resulted in “two complimentary operations” in the Atlanta market. There was no mention of a tuck-in of acquired operations into one of the company’s existing facilities.

Mittera, Knepper and Drummond represent a sub-trend within the larger market for commercial printing companies. Each has established a strong core geographic base (e.g. Des Moines, Pittsburgh, Jacksonville) and is growing strategically by establishing a stake in a new region and then building out from there with additional acquisitions (or in the case with Mittera, acquiring former consolidators).

However, we do not expect the basic underlying dynamic in the commercial printing segment to change. Demand for commercial printing services is predicted to decline, albeit at a rate that is less drastic than in the past decade. That decline will drive more consolidation. These market conditions mean that in all likelihood three out of every four transactions will continue to be “tuck-ins” in which the acquired business is closed, and customers and key employees are transitioned to the acquirer’s existing production facility. Nonetheless, we note that another trend is emerging in which financially healthy and operationally efficient regional companies leapfrog to an adjacent metro market and build out an additional geographic market position via a series of strategically sound acquisitions.


Diversified Graphic and Marketing Services

H.I.G. Capital is on a tear, making significant investments in print-centric companies, and now is invested across the printing industry, from digital to display to direct mail.



In its latest move, H.I.G. portfolio company Vision Integrated Graphics has acquired SourceLink Acquisition. The acquired company provides personalized marketing solutions using proprietary data modeling. Notably, the purchase includes the New York-based boutique digital agency Path Interactive which SourceLink acquired in 2018.

While both Vision Integrated Graphics and SourceLink Acquisition are prodigious producers of direct mail and other print-centric graphic communications, the sizzle is in the data-analytics, predictive modeling, creative services and multi-channel execution that drives higher response rates. Layered on top of, and obscuring the company’s core print production, SourceLink touts its digital team and non-print services including SEO, paid search, social media, digital media, design, and video production.

Despite the dominance of digital marketing services in the customer-facing messages from Vision and SourceLink, it’s clear from the roster of H.I.G. acquisitions over the past several years that this global private equity powerhouse believes in the future of print.


* Graphic Arts Advisors, publisher of The Target Report, served as exclusive advisors to Dual Print & Mail in this transaction.

2019 November - 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
Knepper Press No Data Clinton, PA Dual Print & Mail No Data Cheektowaga, NY 11/29/19 No Data Merger
(Graphic Arts Advisors)
Commercial printing Link
Impact No Data Minneapolis, MN Infinity Direct No Data Plymouth, MN 11/27/19 No Data Acquisition Direct mail marketing Link
All American Label and Packaging No Data Dublin, CA Label Art of California No Data Oakland, CA 11/22/19 No Data Acquisition Label printing Link
Avery Dennison $7,070 Glendale, CA Transponder Business
(Div. Smartrac)
$140.0 Amsterdam,
The Netherlands
11/21/19 $252 Acquisition RFID Inlays Link
Mittera Group No Data Des Moines, IA Fuse No Data Berkeley, IL 11/21/19 No Data Asset Acquisition Commercial printing Link
Vision Integrated Graphics
(Port co. H.I.G. Capital)
No Data Bolingbrook, IL SourceLink Acquisition No Data Itasca, IL 11/21/19 No Data Acquisition Direct Mail & Marketing Link
J.S. McCarthy Printers ESOP No Data Augusta, ME J.S. McCarthy Printers No Data Augusta, ME 11/20/19 No Data Acquisition Commercial printing Link
CFS No Data Norton, MA The Field Companies No Data Watertown, MA 11/15/19 No Data Acquisition Print & fulfillment services Link
CCL Industries $4,035 Toronto, ON Stuck on You Holdings $8.3 Breakwater,
Australia
11/14/19 $8.1 Acquisition Customized labels Link
Walker360 No Data Montgomery, AL American Printing Co No Data Birmingham, AL 11/12/19 No Data 363 Sale in Ch. 11 Commercial printing Link
POS Professional Office Services No Data Waterloo, IA Palmer Printing No Data Waite Park, MN 11/11/19 No Data Acquisition Commercial printing Link
AR Metallizing
(Div. Nissha)
No Data Genk, Belgium Eurofoil Paper Coating No Data Berlin, Germany 11/8/19 No Data Acquisition Specialty substrates Link
Global Graphics No Data Cambridge, UK Xitron
(Div. Vanguard Graphics Int'l)
$4.8 Ann Arbor, MI 11/8/19 $4.5 Acquisition Print imaging software Link
Fujifilm $20,846 Tokyo, Japan Fuji Xerox $11,100 Tokyo, Japan 11/5/19 $2,300 Buyout of Minority Digital printing devices Link
Stouse
(Port co. Goldner Hawn)
No Data New Century, KS Magna-Plus No Data Kansas City, KS 11/4/19 No Data Acquisition Label printing & promo Link
Northwestern Printers Mngt. No Data Hays, KS Northwestern Printers No Data Hays, KS 11/2/19 No Data Mngt. Buyout Printing & copying Link


2019 November - 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:
First Class Printing, Inc. 11/6/19 No Data 19-14730 Fayetteville, TN 6th Eastern TN
Chattanooga
Shelley D. Rucker Steven L. Lefkovitz Commercial printing
Beach Mountain Press, Inc.
(DBA Minuteman Press)
11/18/19 No Data 19-71508 Roanoke, VA 4th Western VA
Roanoke
Paul M. Black Richard Daniel Scott  Printing & copying
J&M Printing, Inc. 11/12/19 No Data 19-27028 Rocklin, CA 9th Eastern CA
Fresno
Fredrick Clement Dale A. Orthner Commercial printing


2019 November - 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
Impika inkjet manufacturing facility TBD No Data Aubagne, France Xerox Norwalk, CT 11/26/19 Inkjet production Link
LSC Communications - Printing facility Dec-19 No Data Philadelphia, PA LSC Communications Chicago, IL Nov-19 Bible printing Link
American Printing 1/30/20 No Data Birmingham, AL N/A None Nov-19 Commercial printing Link
Melnor Graphics 2/10/20 No Data Toledo, OH N/A None Nov-19 Retail insert printing Link