Monday, October 7, 2019

Behind the Scenes in Photobooks – September 2019 M&A Activity


Seattle-based RPI announced the acquisition of on-demand printing assets from SoftPrint Holdings. The acquired assets include the ColorCentric production facility located in Rochester, New York. The acquisition includes ColorCentric’s “printernet” software that drives personalized print-on-demand production of products that are produced by a network of printing companies located in Canada, Australia, and New Zealand, as well as in the United States. The ColorCentric model layers perfectly onto the RPI business-to-business model, producing photobooks and other personalized printed products for resellers.

Cruise all the available pages on the RPI and ColorCentric websites, and try as you might, you will not find the expected photobook app to build your own personalized photobook, calendar, holiday card or other printed items. Nor can you find a way to place an order. That’s because RPI, and the newly acquired ColorCentric, operate behind the scenes as “white label” back-end manufacturers for other online websites, large scale retailers and commercial print providers.

With financial backing from private equity firm Riverlake Partners and additional funding from HCAP Partners, RPI has added onto its original west-coast production platform, establishing RPI Europe in 2011 with the purchase of Paro, a printing company in Eindhoven, the Netherlands. In 2013, the company reached across the US to establish an east coast manufacturing facility with the acquisition of DPI in Atlanta, Georgia.

RPI was not originally a technology start-up, rather the company had its roots firmly in commercial and document printing, having been established in Seattle back in 1979 as Reischling Press. In what must have been a move fraught with risk and uncertainty, the company made the prescient decision in 2006 to jettison its commercial print division and shift exclusively to private label manufacturing for e-commerce companies. With the explosion of the market for on-demand printed products, now 
widely available online and also at retail big-box stores, it appears to have been a good move. 

However, with this latest deal, there appears to be a shift in strategy afoot at RPI: the acquisition from SoftPrint Holdings also included Picaboo.com, the consumer-facing website. In addition to the usual photobooks, calendars and holiday cards, Picaboo also offers the latest rage in consumer printed products, personalized home d├ęcor items including wall canvas prints, photo panels, metal prints, and fabric items such as personalized pillows and blankets. Unlike RPI, which started as a printing company, Picaboo was founded as a pure technology solution company in 2002 in the midst of the dot-com bust. With venture capital backing secured in 2004, the company launched its desktop photo album software in 2005, eventually transitioning to an exclusively browser-based application. In contrast to the ColorCentric platform, a visitor to Picaboo.com is quickly guided to build a personalized product and place a direct order.

With Picaboo, RPI will be up against some very formidable competition from the twin print personalization giants Shutterfly and Snapfish. Both are now owned by Apollo Global Management which purchased the companies three months ago. (See The Target Report: June 2019, Photobooks & Personalized Consumer Products).

We expect that there will be fallout in the market for photobooks and personalized products, which has rapidly matured along with the sophistication of online tools, digital printing technologies and automation to drive efficient print production. We checked back to see how another online photobook company, Chatbooks, is doing in this hypercompetitive market. With funding from Aries Capital Partners, the company appears to still be in the game, albeit with a much more limited offering than the competition. (To see their clever and entertaining consumer print marketing that is still worth a look and a laugh, see The Target Report: February 2017, Consumer Web-to-Print).

Packaging

Transcontinental continues its steady strategic transformation from a printing and publishing company into a packaging powerhouse. Canada’s largest printing company acquired Trilex, a plastics and packaging company in Ecuador that specializes in the production and sale of packaging materials and protective barriers for banana farmers. Further executing its two-prong transitional strategy (acquire packaging assets; divest publishing assets), Transcontinental sold the majority of its specialty media publications and event planning activities to the Contex Group and Newcom Media. (For more about the transformation of Transcontinental, including charts of acquisitions and divestitures since the company embarked on this journey, see The Target Report: April 2018, Getting Flexible in Your Middle Years).

Lebelink, based in Anjou, Quebec, acquired label printer Labelix, located in nearby Granby. Labelink produces a wide variety of products, including shrink sleeves and flexible packaging. The company has four facilities in Canada and one in Fredericksburg, Virginia.

Commercial Printing and Diversified Services

Wise Business Forms, a print provider selling exclusively via print resellers and distributors, acquired Shawnee Systems, a trade-only print manufacturer located in Cincinnati, Ohio that produces business forms. Wise, headquartered in Alpharetta, Georgia, has five manufacturing locations, extending up the eastern coast to Maine and west to Indiana.

Commercial printing company, Range Printing, based in Brainerd, Minnesota announced the acquisition of Spectrum Marketing Services, a regional printing company with strength in the decorated apparel segment.

In an unusual move, three trade creditors of the defunct Colortree Group, which closed its doors abruptly in June, filed a petition in the US Bankruptcy Court in September to force the remnants of the company into an involuntary Chapter 7. Presumably, the creditors wanted to gain some court oversight of the process and have a seat at the table. The filing will mean that a trustee will be appointed to oversee the disposition of remaining assets to the unsecured creditors, if any, after satisfaction of administrative and secured claims. (See The Target Report: June 2019 M&A Activity).



2019 September - 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
Range Printing No Data Brainerd, MN Spectrum Marketing Services No Data Little Falls, MN 9/30/19 No Data Acquisition Commercial printing Link
EO Media Group No Data The Bulletin
(Prop. Western Communications)
No Data Bend, OR 9/25/19 $0.8 363 Sale in Ch. 11 Community newspaper Link
RPI
(Port co. Riverlake Partners)
No Data Seattle, WA Picaboo.com
(Div. SoftPrint Holdings)
No Data Boise, ID 9/25/19 No Data Asset Acquisition Photobook printing Link
RPI
(Port co. Riverlake Partners)
No Data Seattle, WA ColorCentric / Printernet
(Div. SoftPrint Holdings)
No Data Rochester, NY 9/25/19 No Data Asset Acquisition Photobook printing Link
Vox Media No Data Washington, DC New York Media No Data New York, NY 9/24/19 No Data Acquisition Magazine publisher Link
Orafol No Data Oranienburg,
Germany
Kay Automotive Graphics No Data Lake Orion, MI 9/19/19 No Data Acquisition Industrial printing Link
Contex Group No Data Montreal, QC Specialty media assets
(Prop. Transcontinental)
No Data Montreal, QC 9/19/19 No Data Acquisition Business publications Link
Newcom Media No Data Etobicoke, ON Specialty media assets
(Prop. Transcontinental)
No Data Montreal, QC 9/19/19 No Data Acquisition Investment publications Link
Labelink No Data Anjou, QC Labelix No Data Granby, QC 9/18/19 No Data Acquisition Labels Link
Wise Business Forms No Data Alpharetta, GA Shawnee Systems No Data Cincinnati 9/18/19 No Data Acquisition Forms printing Link
East Arkansas Broadcasters No Data Jonesboro, AR Stuttgart Daily Leader
(Prop. Gatehouse Media)
No Data Stuttgart, AR 9/17/19 No Data Acquisition Community newspaper Link
Southland Printing No Data Shreveport, LA Digital Printing Systems No Data Azuza, CA 9/9/19 No Data Asset acquisition
(Strategic Growth)
Parking system tickets Link
Transcontinental $1,957 Montreal, QC Trilex No Data Guayaquil,
Ecuador
9/5/19 No Data Purchase of Majority Interest Plastic packaging Link
FCA Packaging
(Port co. Delos Capital)
No Data Moline, IL Transpak
(Div. Quad/Graphics)
No Data
($4,220)
Sussex, WI 9/4/19 $10.0 Acquisition Industrial wood crating Link
Curated Experiences Group No Data Tampa Bay, FL Editor and Publisher
(Prop. Duncan McIntosh Co.)
No Data Irvine, CA 9/3/19 No Data Acquisition Trade news publisher Link


2019 September - 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:
No Chapter 11 Filings Found this Month --- --- --- --- --- --- --- --- ---
Chapter 7 Filings:
Colortree Group, Inc. 9/11/19 $57.0 19-34739 Richmond, VA 4th Eastern VA
Richmond
Keith L. Phillips Pro Se Direct mail & envelope printing


2019 September - 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
Midlands Printing 10/16/19 No Data Camden, SC N/A None Sep-19 Commercial printing Link
Lifetouch - Printing facility 11/6/19 No Data Loves Park, IL Lifetouch Eden Prairie, MN Sep-19 Yearbook printing Link

Saturday, September 7, 2019

The Target Report Annual Recap – August 2019 M&A Activity



As readers of The Target Report know, we view the industry from the perspective of transactional activity. Over the past eight years, we have chronicled, logged, and commented on the robust merger and acquisition activity in the printing, packaging and related industries. As we get ready for the fall season which is replete with multiple trade shows, peer group meetings and opportunities as more companies come to market, we take a look back at the data on transactional activity that we have compiled and reported to you in our monthly reports. Our view this month is from the “30,000-foot level,” parsing the industry transactional data by industry segment, including bankruptcy filings and plant closures. This year we take a deeper dive and seek to provide some insight into not just the quantity and seasonality of transactions by segment, but also a view into the rationale that is driving deal activity.

We reviewed, categorized, sorted, counted and charted the data we have collected, comparing the past two years. Based on the number of transactions, the past twelve months were a bit quieter than the twelve months ended last August, with approximately 8% fewer transactions. Last year at this time, our year-over-year analysis showed that the trends were amazingly consistent to the prior year. M&A activity in our industry has slowed down, but not by much.

Commercial printing companies (general, retail inserts, catalog printers, copy shops and traditional display) and packaging companies (labels, folding cartons, flexible packaging and corrugated cartons) once again rank highest in the number of deals announced, followed closely by print-centric publishing companies (newspapers and magazines). Activity in the wide format segment (banners, grand format, trade show and retail signage) was steady and stable. There were a significant number of deals in the materials manufacturing segment, primarily due to the turmoil in the papermaking and distribution industry.



When we look at the seasonality of transactional activity, as shown in the chart below, we see a picture of the overall reduced activity, with a consistent downward trend each year as we get to the holiday season and year end.



Transactional activity tells us that an industry segment is undergoing change, however the number of deals does not tell us if that activity is indicative of positive or negative change. To determine a directional indication, we track the number of bankruptcy filings and non-bankruptcy plant closures and correlate this information with the overall transactional activity. Our thesis, born out over several years and confirmed by industry stats derived from other sources, is that an industry segment with a high number of transactions that is also experiencing closures and bankruptcies is or will be in a contraction phase. There will be opportunities for consolidation at bargain prices for those companies that defy the downward trend. This has certainly been true in the commercial printing segment (and obvious to even those outside our industry).

As we have noted over the past year, there have been warning signs emerging from our data in the wide format segment, especially in the undifferentiated end of the wide format business that offers wide format printing on a square foot pricing basis. Book printing has also been a difficult segment for some, with acquisition opportunities presenting from bankruptcies and closures.

Conversely, segments in which the number of transactions does not correlate directly with closures and bankruptcies are more likely to be expanding and consolidation opportunities will come at much higher prices. Virtually all the packaging segments are experiencing steady transactional activity, without the corresponding bankruptcy filings and plant closures, indicating a very healthy environment for sellers as the industry consolidates.



As noted, we also track activity in non-bankruptcy plant closures; many companies simply close up and just disappear without a formal bankruptcy filing. Other times, a closure does not mean that the company has ceased operating, it may simply be that one of the larger printing firms is “rationalizing” their production capacity. Either way, closures are indicative of change, usually resulting from downward pressure in a market segment. Consistent with the other data and as expected, general commercial printing companies represent the majority of printing facilities closing up shop.

Several binderies, book printing and newspaper printing companies closed up shop over the past year. Newspaper and magazine publishers and the printers that serve them have closed, as well as a number of paper mills affected by the reduction in demand for these papers.



When we look at the rationale behind the transactions in the commercial printing segment, we find a loud and clear predominance of tuck-in deals in which the customers of the acquired company are transitioned to the buyer’s production facility. In these tuck-in transactions, buyers will often leave the disposition of the plant and equipment to the seller, or to the seller’s agent, avoiding responsibility for trade and other debt, possibly “cherry picking” certain equipment that is needed or desirable for the smooth continued servicing of the acquired customers. In two instances out of the twenty-eight tuck-ins, the transaction was a “reverse tuck-in” in which the buyer acquired the assets and facility of the seller and moved their business into the purchased company.

Nonetheless, there were still eleven acquisitions in the commercial printing segment where the acquired facility was important and will remain in operation. That was especially notable in one acquisition of a retail inserts printing company and another transaction where the target company produced retail displays.

There were seven acquisitions where the acquirer noted that the purchased company added to their service offerings, as well as seven deals where the logic was to expand geographically. Of all thirty-nine transactions that we noted in the commercial printing segment, only four had a private equity sponsor and there were no companies purchased to form a new “platform” for building out a larger company.



The picture that emerges in the packaging segment is very different. Of the thirty-three transactions that we recorded over the past twelve months in the packaging segment, only two were reported to be tuck-ins, one that produced labels and one that manufactured folding cartons. In all the other cases, the buyers noted that the acquired location was an important element of the rationale to complete the deal. In some, the acquired company had multiple locations, or was global in scope. In eighteen instances, geographic expansion or diversity of the acquired locations was also noted as a key element in the buyer’s logic.

Private equity was involved in eighteen of the transactions, clear evidence that the roll-up model, with financial sponsorship from private equity, is in full swing across the various packaging segments. Interestingly, we did not note any new “platforms” being established by private equity in packaging, indicating to us that competition is already stiff among the existing players for packaging properties as they come on the market, squeezing out opportunities for the formation of new platform companies.



For our purposes in forming a picture of the various market segments that comprise the overall print-centric industries, we separate out companies that produce mostly wide format products from the more generalized commercial printing segment. Here we see proportionately fewer tuck-ins than in general commercial printing, with only three tuck-ins noted out of twelve total deals. The other nine transactions were based on maintaining operations at the acquired facility, some of which were significant in size.

Only two of the deals were based on adding wide format as a new service offering, which we attribute to the maturation of the wide format business and widespread adaption of these technologies into the larger industry. Three buyers noted geographic expansion as a fundamental reason for completing the acquisition; one of the larger deals was billed as a merger of equals and created a national footprint bridging east and west coasts. Four deals involved private equity firms, and there were two new platforms formed, indicating to us that private equity is taking note of the wide format segment.



And finally, we dug into the mailing services segment, which we have found to be more active over the past couple years. Of six deals we recorded, two were tuck-ins, in both cases the acquirer was a commercial printing company that was seeking to add mailing services or to expand and improve their current service offering. Private equity was not involved in any of the transactions and no new platform companies were formed. Two of the deals expanded the buyer’s business geographically, and in one transaction a commercial printing company acquired a fairly significant mailing services business, announcing that the acquired location would continue as a stand-alone operation.








2019 August - 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
Wallace Carlson $10.7 Minnetonka, MN J-C Press No Data Owatonna, MN 8/30/19 No Data Acquisition Commercial printer Link
Champaign Multimedia Group No Data West Frankfort, IL News-Gazette Media No Data Champaign, IL 8/30/19 No Data Acquisition Community newspapers Link
DIC Corporation $7,433 Tokyo, Japan BASF Colors & Effects
(Div. BASF)
No Data Ludwigshafen am Rhein, Germany 8/29/19 No Data Acquisition Pigments Link
Drummond No Data Jacksonville, FL PSP Retail No Data Decatur, GA 8/25/19 No Data Acquisition Wide format & retail graphics Link
United Business Mail No Data Minneapolis, MN Commingle Business
(Div. LSC Communications)
No Data Aurora, IL 8/21/19 $11.3 Acquisition Commingling services Link
Paper Converting Machine Co.
(sub. Barry-Wehmiller)
No Data Green Bay, WI RDP Marathon No Data Laval, QC 8/16/19 No Data Acquisition Flexo & gravure presses Link
Paper Converting Machine Co.
(sub. Barry-Wehmiller)
No Data Green Bay, WI IPT Digital No Data Sarasota, FL 8/16/19 No Data Acquisition Flexo press conversions Link
Finch Paper
(Port co. Atlas & Blue Wolf)
$280 Glen Falls, NY French Paper Co. No Data Niles, MI 8/16/19 No Data Acquisition Uncoated printing papers Link
Solisco No Data Scott, QC Norecob No Data St-Jules, QC 8/16/19 No Data Acquisition Catalog & book printing Link
Signature Graphics No Data Portland, OR Target Media Northwest
(Div. Lee Enterprises)
No Data Spokane, WA 8/13/19 No Data Acquisition Retail circular printing Link
Specialty Graphic Imaging Association (SGIA) No Data Fairfax, VA NAPCO Media No Data Philadelphia, PA 8/6/19 No Data Acquisition Magazine publisher Link
Phase 3 Marketing and Communications $26.0 Atlanta, GA Imagers No Data Atlanta, GA 8/6/19 No Data Acquisition Commercial printer Link
New Media Investment
(Parent of GateHouse Media)
$1,590 New York, NY Gannett $2,790 McLean, VA 8/5/19 $1,380 Acquisition Newspaper publisher Link
Avant Publications
(Div. Champion Media Group)
No Data Laurinburg, NC Times Leader
(Prop Civitas Media)
No Data Wilkes-Barre, PA 8/2/19 No Data Acquisition Community newspapers Link
Sappi $5,830 Johannesburg,
South Africa
Paper mill
(Prop. Rayonier)
No Data Matane, QC 8/1/19 $175.0 Acquisition Pulp Mill Link


2019 August - 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:
Costello Industries, Inc.
dba Costello Printing & Design
8/26/19 No Data 19-23365 Tarentum, PA 3rd Western PA
Pittsburgh
Gregory L. Taddonio Christopher M. Frye  Commercial & book printing
Chapter 7 Filings:
Southeast Media, Inc. 8/20/19 No Data 19-34639 Conroe, TX 5th Southern TX
McAllen
Eduardo V. Rodriguez Theresa D. Mobley  Commercial Printing
WTD Printing, Inc. 8/8/19 No Data 19-82352 Decatur, AL 11th Northern AL
Decatur
Clifton R. Jessup Jr. John Zingarelli  Printing & copying


2019 August - 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
Quad/Graphics - Printing facility 9/14/19 No Data Shakopee, MN Quad Graphics Sussex, WI  8/14/19 Retail inserts
Formerly Vertis printing facility
Link
LSC Communications - Printing plant 11/30/19 No Data Torrance, CA LSC Communications Chicago, IL 8/8/19 Magazine & catalog printing Link