Friday, April 8, 2016

Justice Department Saves Newspapers (really?) – March 2016 M&A Activity



The Department of Justice has entered the fray for the survival of printed news. As the bidding was being finalized to purchase the bankrupt Freedom Communications in Southern California, DOJ’s Antitrust Division stepped in at the last minute and pulled the plug, claiming that its action would ensure that competition in the newspaper industry is protected.

The DOJ had rattled its sword two days before the bids were in and warned the competing bidders that it would view a winning bid from Chicago-based Tribune Publishing as anti-competitive to the control of the news, as well creating a near-monopoly of the newspaper printing press capacity, in the region from Los Angeles to San Diego.

Freedom, which publishes the Orange County Register and the Riverside Press-Enterprise, ignored the warning from DOJ and proceed to select the bid from Tribune Publishing which was the highest by approximately $5 million. According to some industry pundits, Tribune Publishing was also logically the best bid because the combination of Tribune with Freedom would create a viable reporting and printing enterprise that could survive for the long term. Not to be ignored, the DOJ’s Antitrust division filed suit within hours to stop the sale to Tribune Publishing, and requested a restraining order to halt the process. A U.S. District judge quickly agreed to the restraining order. Without adequate time left to litigate as the drop-dead date from Freedom’s lender approached, Tribune Publishing was effectively out of the running to acquire Freedom Communications.

Lurking in the background was Freedom’s management group, which had initiated the bankruptcy process by filing Chapter 11 in November 2015, with the hopes of emerging from bankruptcy as the new owners. The company was losing money and shedding staff, subsequent to the widely touted (and as it turned out, wildly optimistic) roll-up of second-tier daily newspapers in the Southern California market by Aaron Kushner, who had earned a modest fortune in the greeting-card business. Kushner’s investment thesis was in stark contrast to the norm in the industry; hire more reporters, price online access on par with the printed newspaper and increase page counts. Even paper quality was upgraded. When the well-intentioned efforts failed, Kushner departed and management put the company into bankruptcy. From all reports, the management group never really had a chance given that the big players were very interested in acquiring Freedom’s position in the massive Los Angeles metro market.

Next in line behind Tribune Publishing, and in front of the management group’s proposal, was the bid from Denver-based Digital First Media (wishful-thinking name for a company that publishes 97 printed newspaper titles). Bringing the whirlwind process to a close on March 21st, the bankruptcy judge approved the sale of Freedom Communications to Digital First Media.

Digital First Media is owned by the mysterious New York-based hedge fund Alden Global Capital. In an ironic twist that is amazingly common in the topsy-turvy world of newspaper ownership, Alden Global Capital was previously an investor in Freedom Communications, buying the company out of its first bankruptcy in 2010, then selling it to a trust that subsequently sold the newspaper titles to Kushner.

For the time being, at least, the printing presses will continue to roll at the two competing daily newspapers serving the Los Angeles metro region. However, I don’t believe that this story is over as the wishful thinking exhibited by the DOJ flies in the face of the economics of the printed daily newspaper. The economic trends that have played out in city after city during the past two decades are inexorable; the internet has introduced alternative channels and real competition into the market for advertising. The simple truth is that the market may not be able to support multiple printed newspapers in many markets, even ones as large as the Los Angeles metro area.



2016 March - 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
Releases
Transilwrap
(Port co. The Jordan Company)
No Data Franklin Park, IL Dow Chemical - Global Specialty Films Division $4,878 Midland, MI 3/31/16 No Data Acquisition Specialty packaging films Link
New London Communications
Mngt Team
No Data Alpharetta, GA New London Communications
(Port co. Valesco Industries)
No Data Alpharetta, GA 3/29/16 No Data Mngt. Buyout Commercial printing Link
Graphic Packaging $4,160 Atlanta, GA Metro Packaging & Imaging No Data Wayne, NJ 3/29/16 No Data Acquisition Folding cartons Link
Ennis $581.0 Midlothian, TX  Major Business Systems No Data Hillsborough, SC 3/22/16 No Data Acquisition Forms manufacturing Link
Digital First Media
(Port co. Alden Global Capital)
No Data Denver, CO Freedom Communications No Data Santa Ana, CA 3/20/16 $52.3 363 Sale in Ch. 11 Newspaper publishing Link
Lindenmeyr Munroe
(Div. Central National Gottesman)
$5,500 Purchase, NY C.J. Duffey Paper Company No Data Minneapolis, MN 3/21/16 No Data Acquisition Paper distribution Link
International Paper $2,236 Memphis, TN Holmen Paper - Newsprint Mill No Data Madrid, Spain 3/16/16 $150.0 Acquisition Paper mill Link
Konica Minolta $9,180 Tokyo, Japan Meridian Imaging Solutions No Data Alexandria, VA 3/15/16 No Data Acquisition Managed print & IT services Link
Xiamen Bridge Hexing Equity No Data Shenzhen, China International Paper - Corrugated
Division, China/Southeast Asia
$2,236 Memphis, TN 3/14/16 $200.0 Acquisition Corrugated packaging Link
DFS
(Div. Deluxe)
No Data Groton, MA Birchcraft Studios No Data Rockland MA 3/10/16 No Data Acquisition Social stationery Link
Postal Center International No Data Fort Lauderdale, FL Original Impressions No Data Miami, FL 3/10/16 No Data Acquisition Commercial printing Link
Coveris - Imagenet Division
(Port. co. Sun Capital Partners)
$2,759 Chicago, IL Rivendell Europe No Data Leeds, UK 3/7/16 No Data Acquisition Photo/retouching studio Link
CCL Industries $3,040 Toronto, ON Powerpress Rotulos $6.5 Sao Paolo, Brazil 3/7/16 $10.3 Acquisition Labels Link
Ingram Content Group No Data La Vergne, TN Perseus - Distribution Group No Data New York, NY 3/3/16 No Data Acquisition
(Greenhill & Co)
Publisher services Link
Coveris
(Port. co. Sun Capital Partners)
$2,759 Chicago, IL Supraplast No Data Guayaquil, Ecuador 3/3/16 No Data Acquisition Packaging printing Link
Presstek
(Port co. American Ind. Partners)
No Data Hudson, NH Anocoil No Data Rockville, CT 3/3/16 No Data Acquisition Printing plates Link
Electronics for Imaging (EFI) $882.5 Foster City, CA Rialco $11.3 Bradford, UK 3/2/16 No Data Acquisition Sublimation dye powders Link
Orora $2,768 Hawthorn,
Australia
IntegraColor No Data Dallas, TX 3/1/16 $77.0 Acquisition Retail display & packaging Link
Georgia-Pacific
(Div. Koch Industries)
No Data Atlanta, GA Excel Displays & Packaging No Data Aurora, IL 3/1/16 No Data Acquisition
(Mesirow)
Retail display & packaging Link


2016 March - 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:
Vista Exhibits Inc 3/29/16 No Data 16-11620 Las Vegas, NV 9th Nevada
Las Vegas
Mike K. Nakagawa Michael M. Lin Trade show exhibits


2016 March - 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
Madison Paper Industries
(JV - UPM & Northern SC Paper)
May-16 No Data Madison, ME UPM Helinski, Finland 3/14/16 Paper manufacturing Link
Advanced Printing 3/24/16 No Data Pleasanton, CA None N/A 3/5/16 Commercial & packaging printing Link
P-Tech Print & Mail 3/23/16 No Data Concord, ON None N/A Mar-16 Commercial printing Link
Cain Lithographers 4/28/16 No Data Jackson, MS None N/A Mar-16 Commercial printing Link

Sunday, March 6, 2016

Cold Front Moves In – February 2016 M&A Activity

 
Is the market cooling off for companies in the printing, packaging and related industries? After the peak number of deals announced in January, there was a sudden and noticeable drop off in transactions. No mega-deals were announced in February, and with the exception of two deals by Luxembourg-based powerhouse ink supplier Flint Group, no big players were active. Accentuating the decline in M&A transactions there was a slight uptick in industry-related bankruptcy filings, accompanied by the steady drumbeat of non-bankruptcy plant closures. While it does not appear that we should be battening down the hatches, we may be seeing at minimum a pause in industry transactional activity as buyers take a break while multiples cool off a bit. 

Several private equity fund principals we spoke to have noted that they are taking a bit of a breather and stepping back from the packaging market despite their genuine interest in the segment. They report that sellers have caught “multiple fever” and continue to ask for higher and higher valuations, feeding on the prices they have heard that others obtained, and wanting even more. In a discussion about the broader transactional market at a recent panel discussion consisting of family office investors and their professional managers, there was a general consensus that they have become very selective about new investments. Given the patient nature of their funds, they are sitting it out while multiples cool, rather than chase ever more expensive deals.



Labels

CCL Industries recently announced transactions that illustrate that prices for packaging-related companies may in fact be moderating. Three deals announced in January had an average enterprise value to EBITDA ratio of just 5.1, in contrast to the oft-reported multiple range of 6 times to 8 times EBITDA for companies in the packaging segment. CCL acquired Woelco, a German label printer that specializes in OEM labels for automotive, electronics and industrial applications. Woelco has revenues of $31 million, with EBITDA of $4.5 million (14.5%). The Company was acquired for $27 million, 6.0 times EBITDA, 87% of revenues.

In another strategic acquisition to expand its international footprint, CCL purchased Label Art in Dublin, Ireland. In this deal, CCL paid 5.0 times EBITDA for the company which has $17 million revenues with $3 million EBITDA (a very respectable 17.6% in this segment). The $15 million price tag equated to 88% of revenues.

CCL also exercised its deal discipline in a third transaction for the smaller specialty printer Mabel’s Labels, located much closer to Toronto, CCL’s home base. The acquired company produces highly personalized labels for the consumer market through its online shipping portal. While on a price-to-revenue ratio the deal seems rich at 126% of annual revenues of $9.5 million, based on Mabel’s EBITDA of $2.8 million (29.5%), the multiple paid was a modest 4.3 times EBITDA.

Trade Association Merger

In a sign of the times indicative of the continued evolution in the commercial printing segment, Epicomm announced that the trade association will be merging with Idealliance. Epicomm itself is the result of the merger of three trade associations (AMSP, NAPL and NAQP), having rebranded only last January. AMSP in turn was the rebranded identity of the former Mailing and Fulfillment Service Association (MFSA).

Epicomm focuses on the big picture of the printing industry, conducting high-level economic research, advocating and providing management training and expertise. Idealliance, on the other hand, has been instrumental on the ground level, bringing knowledge of workflow and technical standards to the industry. 


Commercial Printing

The Midwest commercial printer with the unique name, Bolger Vision Beyond Print, acquired fellow Minnesotan Twin Cities printer Western Graphics. While terms of the deal were not announced, MB Business Capital reportedly provided a $11.25 senior credit facility to Bolger in conjunction with the acquisition. 

Action Print* was acquired by Universal Printing Services. Both companies are located in Des Moines, Iowa and the merged companies will be consolidated into Universal’s current location. Thomas Printworks, formerly Thomas Reprographics, headquartered in Richardson, Texas, acquired Seebridge Media in Houston. With over 25 locations in Texas, Arizona, Minnesota and Florida, the acquisition, as well as the new name, appears to signal a much deeper commitment to a broad base of print-related services.


* Graphic Arts Advisors, publisher of The Target Report, served as exclusive advisor to Action Print in this transaction.



2016 February - 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
Releases
Universal Printing Services No Data Des Moines, IA Action Print No Data W. Des Moines, IA 2/29/16 No Data
Acquisition
(Graphic Arts Advisors)
Commercial printing Link
RFE Investment Partners No Data New Canaan, CT Stagnito Business Information
(Port co. Topspin Partners)
No Data Deerfield, IL 2/19/16 No Data Acquisition/Merger
(JEGi)
Business publishing Link
RFE Investment Partners No Data Deerfield, IL Edgell Communications No Data Randolph, NJ 2/19/16 No Data Acquisition/Merger
(JEGi)
Business publishing Link
Flint Group $2,900 Luxembourg Siegwerk No Data Siegburg, Germany 2/17/16 No Data Acquisition Gravure inks Link
Bolger Vision Beyond Print No Data Minneapolis, MN Western Graphics No Data St. Paul, MN 2/16/16 No Data Acquisition Commercial printing Link
Thomas Printworks No Data Richardson, TX Seebridge Media No Data Houston, TX 2/16/16 No Data Acquisition Commercial printing Link
Color Management Group No Data Morgan Hill, CA Elevated Color No Data Lakewood, CO 2/10/16 No Data Acquisition Color management Link
Liberty Carton Company No Data Minneapolis, MN Western Container Corp No Data Minneapolis, MN 2/4/16 No Data Acquisition Corrugated products Link
Idealliance No Data Alexandria, VA Epicomm No Data Alexandria, VA 2/3/16 No Data Merger Trade associations Link
Flint Group $2,900 Luxembourg Advanced Color Systems No Data Tualatin, OR 2/2/16 No Data Acquisition Water-based inks Link


2016 February - 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:
Mercury Signs & Display, Ltd. 2/23/16 No Data 16-30906 Houston, TX 5th Southern TX
Houston
Jeff Bohm Margaret
Maxwell McClure 
Screen & wide format printing 
AB Printing Inc 2/12/16 No Data 16-01027 San Juan, PR 1st  Puerto Rico
San Juan
Mildred Caban Flores Emily Davila Rivera Printing & copying
Hess Commercial Printing, Inc. 2/12/16 No Data 16-20470 New Castle, PA 3rd Western PA Jeffery A. Deller Michael P. Kruszewski  Commercial printing
Campbell Graphics, Inc.
(Alpha Graphics 521)
2/9/16 No Data 16-30523 Richmond, VA 4th Eastern VA Kevin R. Huennekens Robert S. Westermann  Printing & copying
Chapter 7 Filings:
Impressions, Inc. 2/29/16 No Data 16-12508 Chester, MD 4th Maryland
Baltimore
Thomas J. Catliota Michael E. Crowson Commercial printing


2016 February - 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 Feb-16 No Data Lenexa, KS Quad Graphics Sussex, WI  2/24/16 Retail inserts
Formerly Vertis printing facility
Link
Faith Printing 2/17/16 No Data Taylors, SC None N/A Feb-16 Commercial printing Link
AlphaGraphics Center 2/9/16 No Data Albuquerque, NM None N/A Feb-16 Printing & copying Link
Pyramid Label 2/9/16 No Data Rohnert Park, CA None N/A Feb-16 Label  printing Link
Michael Graphics 2/11/16 No Data New Brunswick, NJ None N/A Feb-16 Commercial printing Link