Thursday, July 5, 2012

Where have all the Chapter 11’s Gone? – June 2012 M&A Activity

Where have all the Chapter 11’s gone? Is it a good sign for the industry that there were apparently no Chapter 11 filings in the month of June? Could it be that there are fewer printers and related companies in distress? We suspect that there may be another trend behind the dearth of Chapter 11 bankruptcy filings.

Unlike Chapter 7, which, as the reader may know, represents a dead end street for a company, the purpose of Chapter 11 has traditionally been to provide a second chance, preserving value and employment. In a Chapter 11 proceeding, the company is put on life support and protected in an orderly process overseen by the courts. The company owners present a plan of reorganization to the courts and creditors, often including a restructured and reduced debt load. If the plan is confirmed, the company has a clear exit from bankruptcy and drives off into the future, with a full tank of gas, and a renewed scenario for its future prospects.

The lack of Chapter 11 filings in June appears to be the continuation of a long term trend in which owners of smaller companies simply are no longer able to avail themselves of the benefits of the bankruptcy code. Printing company owners, often times entrepreneurs with their life’s work at stake, are avoiding filing for Chapter 11, possibly missing the opportunity to restructure and retain ownership. Nonetheless, for the smaller companies typical of much of the printing industry, this may make a lot of sense. In addition to the expense of professional fees for attorneys, accountants and turnaround professionals, a filing will likely trip defaults in loan covenants, putting additional financial pressure on the company as its lender charges default interest rates and fees. Customers may react by seeking alternative sources for their printing needs, as competitors broadcast the unfortunate company’s new status as debtor-in-possession. When the company is no longer able to service its debt, the lender may begin enforcement of personal guarantees. The pressure mounts, the resources that could have funded a restructuring dwindle and a Chapter 11 filing becomes completely unsustainable. The result is that the company files for liquidation under Chapter 7, the owners hand the keys over to creditors, or they simply close the business and walk away. If there is a residual book of business, the owners find a stronger company in which to “tuck-in” their accounts. Hopefully, the owner has made suitable arrangements with the company’s creditors and is left with some residual value.

Read between the lines throughout the M&A deal log portion of the Target Report each month and you will find that these “tuck-in” deals are well represented. The out-of-gas company goes to the scrap heap of closed printing firms, and the former owner rides off as a passenger in a healthier company, all gassed up and ready to go. Based on the projections for the industry, we expect this trend to continue.

Over in the fast lane, there were some very positive deals by some of the industry’s active players. WS Packaging, with backing from private equity firm, J.W. Childs Associates, L.P, purchased Consolidated Products. Following up on last month’s acquisition of several dozen newspaper properties, Berkshire Hathaway acquired a Texas community newspaper from Evening Post Publishing (for more on the exaggerated reports of the death of printed newspapers, see the May edition of the Target Report).

In an interesting transaction, NewPoint Media Group, with private equity backing from Lion Equity Partners, acquired several specialty publication titles serving targeted segments of the real estate market. As if betting against the tide in real estate was not enough, NewPoint Media doubled down and also acquired the seller’s printing division.

The paper industry continued shuffling pieces around on the chess board. International Paper, responding to its settlement with the U.S. Department of Justice, divested three mills in two separate transactions. Central-National-Gottesman, owner of the Lindenmeyr paper distribution company, added two more distributors to its portfolio, Spicers Paper and Kelly Paper, both with headquarters in California.

In two other notable transactions that demonstrate the continued transition by content creators from ink-on-paper to electronic media, Teldon sold its Print Media Group to Mitchell Press, and Cox Target Media purchased, augmenting its Valpak printed coupons with an online coupon service.

2012 June - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

Deal Party #1
(Surviving Entity)
($Mil )

Party #1 Address

Deal Party #2
($Mil )

Party #2 Address

Deal Structure


NewPoint Media Group No Data Lawrenceville, GA Network Communications No Data Norcross, GA 6/28/12 No Data Asset Acquisition Pub titles & printing facilities. Link
Central National-Gottesman No Data Purchase, NY Spicers Paper
Kelly Paper
$500.0 Santa Fe Springs, CA
City of Industry, CA
6/26/12 No Data Acquisition Paper Distributors Link
RockTenn $5,400 Norcross, GA Mid South Packaging No Data Cullman, AL 6/25/12 No Data Acquisition Corrugated Packaging Link
Cox Target Media No Data Largo, FL No Data Los Angeles, CA 6/21/12 No Data Acquisition Online coupons Link
Frazier Healthcare
(Packaging Coordinators - "PCI")
No Data Seattle, WA Catalent Pharma Solutions No Data Philadelphia, PA 6/20/12 No Data Acquisition - Partial Pharma Packaging Link
Mitchell Press No Data Vancouver, BC Teldon Print Media No Data Vancouver, BC 6/19/12 No Data Acquisition Divestiture of Print Operations Link
Berkshire Hathaway $143,688 Omaha, NE Evening Post Publishing No Data Charleston, SC 6/12/12 No Data Acquisition - Partial 1 community newspaper in TX Link
WS Packaging Group No Data Green Bay, WI Consolidated Products No Data Knoxville, TN 6/4/12 No Data Acquisition Labels & tags Link
Colorfx $74.8 Des Moines, IA Acme Printing No Data Des Moines, IA 6/4/12 No Data Acquisition Commercial  printing Link
Pro Print No Data Duluth, MN Christie Printing No Data Duluth, MN 6/4/12 No Data Merger Commercial  printing Link
New-Indy Containerboard No Data Foxborough, MA International Paper $26,034 Memphis, TN 6/4/12 No Data Asset Acquisition 2 Containerboard paper mills Link
Hood Companies No Data Burlington, ON International Paper $26,034 Memphis, TN 6/4/12 No Data Asset Acquisition 1 Containerboard paper mill Link
Sir Speedy of Westbury No Data Westbury, NY Performance Printing & Graphics No Data Massapequa, NY 6/1/12 No Data Acquisition Commercial  print & copy. Link

2012 June - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries

Filing Party

($Mil )

Case #

Filing Party Address


Region & City


Attorney for Debtor

Chapter 11 Filings:
No Chapter 11 Filings Found this Month --- --- --- --- --- --- --- --- ---
Chapter 7 Filings:
InkOne Communications, Inc. 6/29/12 No Data 12-66277 Smyrna, GA 11th Northern GA
Atlanta, GA
Barbara Ellis-Monro Evan M. Altman Commercial Printing & Repro
Watermarc Graphics, Inc. 6/12/12 No Data 12-25050 Scotch Plains, NJ 3rd New Jersey
Newark, NJ
Rosemary Gambardella Karen E. Bezner Commercial Printing
International Graphic Equipment LTD. 6/26/12 No Data 12-55293 Brownstown, MI 6th Eastern MI
Detroit, MI
Phillip J. Shefferly John C. Lange Graphic Equipment Dealer, New & Used
M&J Printing Solutions, Inc. 6/4/12 No Data 12-91591 Riverbank, CA 9th Eastern CA
Modesto, CA
Ronald H. Sargis Axel B. Gomez Printing & copying