Sunday, May 8, 2016

A Puzzling Future for Specialty Magazines – April 2016 M&A Activity


Kappa Media Group, the publishing arm of centa-millionaire Nicholas Karabot’s Pennsylvania-based business empire, has doubled down on its investments in the printing industry with the acquisition of Vanguard Printing in Ithaca, New York. Vanguard is a web and sheetfed offset printing company with a focus on printing specialty magazines, as well as catalogs and books. The acquisition adds significant printing capacity to Karabots’ portfolio which includes Kappa Graphics, a similarly equipped printing company located in northeast Pennsylvania, not far from Ithaca.

The source of Karabots’ fortune was selling printing and printing supplies to the publisher of Reader’s Digest. He subsequently bought a publishing company that issues a stream of specialty titles including game, crossword and puzzle books, as well as off-beat titles in wrestling and astrology; recently adding adult coloring books (not “adult” topics, just art that is more difficult-to-color). Other businesses in the portfolio include fulfillment services for publishers, a golf resort, vineyards and real estate investments.

No reference to Karabots, the self-proclaimed “bad kid” who belonged to a gang growing up in the South Bronx, would be complete without mentioning his philanthropic activities in the Philly metro area he now calls home: endowing a wing to the Children’s Hospital of Philadelphia, significant donations to the Philadelphia Museum of Art, and a $10 million gift to the Franklin Institute where children learn about science and technology. It would appear that Vanguard Printing has landed in good hands.

In contrast to the success of Kappa Media, another publisher of printed specialty magazines, Harris Publications, threw in the towel and called it quits, shuttering its 75 titles with nary any advance notice. Based in New York City, Harris produced magazines catering to highly focused target audiences including custom automotive (Rides), urban star gossip (Juicy), gardening (Container Gardening), guns (16 titles, including such nuanced specialties like Combat Handguns and Tactical Weapons), pets (Dog News), and more. In announcing the closure, the owner clearly took aim at and blamed digital media and the ongoing disruption in the newsstand distribution system for the company’s failure.

Time Inc. spun off the This Old House brand, including the printed magazine, television production, digital content and brand licensing. This Old House magazine is reported to reach almost 1 million subscribers, and the website attracts 5.5 million unique visitors each month, including 2.9 million via mobile devices. Private equity firm TZP Group, based in New York, provided the capital, backing newly appointed CEO of This Old House, Eric Thorkilsen, in his bid to carve This Old House out of Time Inc.

Packaging

Inland, a multi-process packaging printing company located in La Crosse, Wisconsin, announced the acquisition of Valley Label, a flexible packaging, shrink and roll-fed label printer. Inland serves the food and beverage industry and the purchase of Valley Label expands the company’s position in those markets. This marks the second time in less than a year that Inland has executed on its strategy to grow by acquisition, as defined by CEO Mark Glendenning in September 2015 in his comments about the purchase of Monet Graphics (see The Target Report – September 2015).

Chicago-based Svoboda Capital Partners added a third location to its packaging platform company with the acquisition of flexo and digital prime label printer Hyde Park Label in Austin, Texas. Beginning with the 2012 acquisition of the initial platform company, M.E.I. Labels, located in the Tulsa, Oklahoma area, Svoboda added Dallas-area TVC Label in 2013 and rebranded the group as Infinite Packaging.

Amcor, one of several large global roll-ups in the packaging industry, announced the acquisition of Alusa, a major player in the South American market. Amcor, based in Australia, paid $435 million for Alusa which reported $375 million in revenues and 13.6% EBITDA margins, approximately $51.2 million. The price paid equates to 1.16 times revenues, 8.5 times EBITDA, illustrating once again the higher multiples being paid for larger companies in the packaging segment, especially those that significantly further the acquirer’s strategic position.

Commercial Printing

There were several smaller deals announced in the commercial printing segment, as waning demand for generalized printing services continues to drive consolidation. Of special note, however, privately-held Taylor Corporation announced the acquisition of Staples Print Solutions. With its origins and roots deep in the printing industry, privately-held Taylor has revenues in excess of $2 billion and was the winner in the bidding last year for the assets of bankrupt Standard Register (see The Target Report – June 2015).

It’s unclear at this point how deep Taylor’s influence will reach into Staples at the individual store level, but it does appear that Staples is jettisoning its centralized printing capabilities as it focuses on winning regulatory approval to acquire its competitor in the office supply business, Office Depot.



2016 April - 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
Amcor $6,887 Victoria, Australia Alusa $375.0 Santiago, Chile 4/28/16 $435.0 Acquisition Flexible packaging Link
Trans-Optique (Div. PDI Group)
(PDI Large Format Solutions)
No Data Montreal, QC Imagerie
LVP.ca
No Data Broisbriand, QC
Terrebonne, QC
4/27/16 No Data 3-way merger Large format printing Link
Avery Dennison $5,970 Glendale, CA Mactac (European division)
(Port co. Platinum Equity)
$170.0 Soignies, Belgium 4/27/16 $228.1 Acquisition Pressure sensitive papers Link
Clash Graphics No Data Atlanta, GA Flyers ASAP No Data Atlanta, GA 4/26/16 No Data Acquisition Commercial printing Link
OpenText $1,830 Waterloo, ON HP - Engage Software $90.0
($101,700)
Palo Alto, CA 4/22/16 $170.0 Asset Acquisition Content mngt. software Link
Birdland Acquisition No Data Stockbridge, MA New England Newspapers
(Div. Digital First Media)
No Data Denver, CO 4/21/16 No Data Acquisition Community newspapers Link
Apex Technology No Data Zhuhai, China Lexmark International $3,550 Lexington, KY 4/19/16 $3,600 Acquisition Printing devices Link
Taylor Corp. No Data Mankato, MN Staples Print Solutions
(Div. Staples)
No Data
($2,145)
Framingham, MA 4/18/16 No Data Asset Acquisition Commercial printing facilities Link
Follet $2,600 Westchester, IL Baker & Taylor $1,000 Bridgewater, NJ 4/18/16 No Data Acquisition
(Sagent Advisors)
Book distribution Link
K. McKnight-Goelz No Data Odessa, FL ABCO Graphics & Printing No Data Odessa, FL 4/14/16 No Data Acquisition Commercial printing Link
GateHouse Media
(Div. New Media Investment)
$1,200 Pittsford, NY Journal Multimedia No Data Harrisburg, PA 4/13/16 $18.0 Acquisition Business & trade publishing Link
Treasure Valley Litho No Data Boise, ID Joslyn & Morris Printing No Data Boise, ID 4/12/16 No Data Acquisition Commercial printing Link
Infinite Packaging
(Port co. Svoboda Capital)
No Data Lewisville, TX Hyde Park Label No Data Round Rock, TX 4/11/16 No Data Acquisition Label printing Link
American Press No Data Lake Charles, LA Southwest Daily News
(Div. GateHouse Media Group)
 No Data Sulphur, LA 4/10/16 No Data Acquisition
(Dirks, Van Essen)
Community newspapers Link
Inland No Data La Crosse, WI Valley Label No Data Neenah, WI 4/6/16 No Data Acquisition Flexible packaging Link
Novus Imaging No Data Moultenboro, NH Redwood Technologies No Data Moultonboro NH 4/5/16 No Data Acquisition Inkjet technology design Link
Kappa Media No Data Blue Bell, PA Vanguard Printing No Data Ithaca, NY 4/4/16 No Data Acquisition Publication & catalog printer Link
Dr. Graphx No Data Chicago, IL Langer Printing No Data Chicago, IL 4/4/16 No Data Acquisition Pad printing Link
TZP Growth Partners No Data New York, NY This Old House
(Div. Time, Inc.)
No Data
($3,110)
New York, NY 4/1/16 No Data Acquisition Magazine Publishing Link


2016 April - 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:
Readmond Printing, Inc. 4/19/16 No Data 16-10133 Ashland, KY 6th Eastern KY
Lexington
Gregory R. Schaaf Jeffrey D. Tatterson Commercial printing


2016 April - 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
Harris Publications May-16 No Data New York, NY None N/A 4/28/16 Specialty magazine publisher Link
RR Donnelley  - Printing facility Aug-16 No Data Gresham, OR RR Donnelley Chicago, IL 4/27/16 Directories & commercial printing Link
Northstar Direct May-16 No Data Manchester, NH None N/A 4/22/16 Direct mail printer & lettershop Link
Wickliffe Mill 7/1/16 No Data Wickliffe, KY Verso Paper Memphis, TN 4/6/16 Coated printing papers Link
Climax Packaging Apr-16 No Data Lowville, NY None N/A 4/2/16 Folding cartons Link

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