Saturday, July 7, 2018

What Did Not Happen - June 2018 M&A Activity


There was a marked decline in transactional activity in June in the printing, packaging and related industry segments. There are many possible reasons why reported M&A activity was down for the month: buyers or sellers were preparing for summer vacation and put off closing their deals, lenders delayed funding as interest rates ticked up, or market participants simply chose to not publicize a transaction.*

Even more notable than the dearth of deals was the number of significant plant closures announced last month. Edwards Brothers Malloy, headquartered in Ann Arbor, Michigan, announced the sudden and unexpected shutdown of their extensive book printing operations, closing down completely only two weeks after the announcement. The abrupt decision reportedly was driven by the company’s inability to secure replacement funding or find a buyer for the company after its current lender reduced the company’s credit line.

While management stated that the core problem was a $10 million settlement reached in 2016 to fund a legacy pension liability, we suspect that if the company was otherwise healthy, with reported revenues of $80 million in 2017, a solution could have been devised. Revenues have been declining steadily every year since Edwards Brothers and Malloy merged back in 2012. At the time, the two book printing companies reported that their combined revenues were $115 million. As recently as this past February, the company announced the closure of its offset printing facility in Lillington, North Carolina without a hint that the final end was near.

Lest the reader of The Target Report think that the demise of Edwards Brothers Malloy presages the decline of the printed book, there are plenty of available statistics that indicate that the number of printed books sold in the US has rebounded from its low in 2012, albeit slightly. What has changed dramatically is how they are sold (online) and increasingly how books are printed (digitally and on-demand).

It was reported that before deciding to close up shop, Edwards Brothers Malloy was negotiating to sell the company’s digital printing divisions which, if carved out, was a $16 million business. The buyer in the failed negotiations was Minnesota-based CJK Group, a very active acquirer in the book printing segment. Apparently, whatever was on the table was insufficient to convince the company’s lender to play along, and the decision was made that liquidation was the best path for maximum recovery.

The CJK Group has been bullish on the book printing business. The company has its roots in Bang Printing, a book printer in Brainerd, Minnesota. After a series of acquisitions of companies with core competency in book printing, Bang was rebranded at the holding company level as the CJK Group. The holding company acquired Webcrafters in Madison, Wisconsin in December 2017. The purchase of Webcrafters was the second major acquisition for the CJK Group last year when it also acquired The Sheridan Group (see The Target Report – Legacy Printing Companies Fade Into History).

Another industry consolidator focused on the book printing segment is the newly minted Printing Consolidation Company, backed by private equity sponsor Blackford Capital in Grand Rapids, Michigan. In November 2017, Blackford acquired book binding and fulfillment specialist company Kingsport Book which complements the fund’s prior investment in Dickinson Press, a printer of religious, educational and business books. Printing Consolidation Company’s CEO is on the hunt for additional acquisitions in the book printing segment, stating “the book printing space in the US is a great market for consolidation.”

Company & Plant Closures

Kappa Printing Management Associates announced the closure of the Vanguard Graphics printing company, located just outside of Ithaca, New York. The 200,000 SF facility houses a heatset web and sheetfed offset production company that specializes in catalogs, magazines, digest-size booklets, calendars and other commercial printed products. Kappa acquired the company in April 2016 (see The Target Report – A Puzzling Future for Specialty Magazines). The company is scheduled to cease operations at the end of September.

No reason was given publicly for the closure of Vanguard, and Kappa remains a player in the printing industry, with plants in Wisconsin, Indiana and Pennsylvania. The firm’s most recent acquisition, Times Printing, in Random Lakes, Wisconsin, was acquired only one month after the Vanguard acquisition.

Concord Direct, which runs four heatset web presses churning out high volumes of direct mail solicitations has announced the complete closure of its web printing operations. The company made the decision after its major customer, reportedly Publishers Clearing House which represents two thirds of Concord Direct’s printing business, announced that it would be moving its printing to a Midwest printer. Concord Direct will continue operations at its facility in Concord, New Hampshire with its newly added inkjet press, focusing on smaller, targeted print runs.

Mimeo announced the closure of its printing facility in Newark, New Jersey, purportedly due to the high tax rates in the Garden State. Mimeo plans to move the production to a location that is more favorable to business, possibly adding to its existing facility in Memphis or starting up a printing facility elsewhere in response to tax incentives.

Initially a symbol of Newark’s renaissance, the opening of the Mimeo printing plant in 2008 was attended by aspiring presidential candidate US Senator Cory Booker, at that time the Mayor of Newark. Mimeo was an early mover in the online on-demand cloud-based print segment, with all-digital printing production, manufactured in centralized plants located near major shipping hubs. The company has attracted HP and Goldman Sachs as investors, among others, and now reports over $100 million in revenues.

While one month does not yet indicate a compelling and clear trend, the lack of robust positive M&A activity in June, combined with multiple significant closures, may be the warning shot over the bow that significant consolidation and industry contraction is in store just over the horizon.


* e.g. Graphic Arts Advisors advised a seller in a transaction that closed in June, however, the buyer has requested that the transaction not be publicized at this time.


2018 June - 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
Tekni-Plex No Data Wayne, PA Oracle Healthcare Packaging
(Port co. Centre Lane Partners)
No Data Winston-Salem, NC 6/19/18 No Data Acquisition Specialty flexible packaging Link
Vomela $237.0 St. Paul, MN Palmer Printing No Data Chicago, IL 6/19/18 No Data Acquisition Commercial printing Link
Mark Andy No Data Chesterfield, MO Brandtjen & Kluge No Data St. Croix Falls, WI 6/18/18 No Data Acquisition Finishing equipment Link
American Media No Data New York, NY In Touch (and other titles)
(Prop. Bauer Publications)
No Data Englewood Cliffs, NJ 6/15/18 $80.0 Acquisition Magazine publishing Link
Graphic Packaging $4,820 Atlanta, GA PFP No Data Lebanon, TN 6/12/18 No Data Acquisition Diecut paper products Link
Repacorp No Data Tipp City, OH Hooven-Dayton No Data Miamisburg, OH 6/11/18 No Data Acquisition Labels & flexible packaging Link
InComm
(Port co. Warburg Pincus)
No Data Atlanta, GA Gift Card Impressions No Data Kansas City, MO 6/5/18 No Data Acquisition Prepaid gift card marketing Link
BW Paper Systems
(sub. Barry-Wehmiller)
No Data Phillips, WI K&H Machinery No Data Dongguan, China 6/4/18 No Data Acquisition Corrugating machinery Link


2018 June - 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:
Great Atlantic Graphics, Inc. 6/29/18 No Data 18-14384 Lansdale, PA 3rd Eastern PA
Philadelphia
Ashely M. Chan Albert A. Ciardi, III Commercial printing
Dragonfly Graphics, Inc. 6/12/18 No Data 18-10155 Gainesville, FL 11th Northern FL
Tallahassee
Karen K. Specie Lisa Caryl Cohen  Screen & wide format printing
Glover Corporation, Inc. 6/1/18 No Data 18-02770 Raleigh, NC 4th Eastern NC
Raleigh
Joseph N. Callaway John Paul Cournoyer Commercial printing
Chapter 7 Filings:
Evanston Sign and Graphics, Inc 6/13/18 No Data 18-16833 Chicago, IL 7th Northern IL
Chicago
LaShonda A. Hunt David P Leibowitz Signage
Insolvency Filings:
Zanders
(Port co. Mutares AG)
6/28/18 No Data 75 IN 232/18 Bergisch Gladbach
Germany
Cologne District
Court, Germany
N/A Dr. Marc d'Avoine Printing papers


2018 June - 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
Vanguard Graphics
(Div. Kappa Media)
9/29/18 No Data Dryden, NY Kappa Printing Management Fort Washington, PA 6/29/18 Commercial printing Link
Concord Direct - Web Printing Facility Sep-18 $42.0 Concord, NH None N/A 6/26/18 Direct mail printing Link
Rose Printing Company 7/26/18 No Data Tallahassee, FL None N/A Jun-18 Book printing Link
Acme Bookbinding 6/13/18 No Data Boston, MA None N/A Jun-18 Book binding Link
Mimeo - Printing Facility 7/7/18 No Data Newark, NJ Mimeo New York 6/4/18 Moving operations to Memphis, TN Link
Edwards Brothers Malloy 6/15/18 $95.0 Ann Arbor, MI None N/A 6/1/18 Book printing Link

Thursday, June 7, 2018

Corrugated Gets Glam - May 2018 M&A Activity


The CEO of DS Smith, commenting on the company’s most recent acquisition in the corrugated segment, noted “This is an exciting and fast-paced environment where we are experiencing strong momentum.” Really? Could he actually be referring to that ubiquitous, plain, brown, and most of all, simple material, used in the corrugated box and retail display segments of the printing industry?

DS Smith, the London-based global powerhouse in the containerboard, corrugated packaging and retail display segments, announced its second acquisition in the US market within the last year. The company now has a total US presence of 23 facilities and more than 2,000 employees. The most recent acquisition, Corrugated Container Corporation (“CCC”) of Roanoke, Virginia, brings additional expertise in corrugated box design and manufacturing, as well as a core competency in retail displays. CCC will be piggy-backed on and integrated with DS Smith’s much larger acquisition, announced last year, of Virginia-based Interstate Resources.

With that acquisition of Interstate Resources, DS Smith accomplished in one fell swoop what would have taken years to build out organically. That strategically important deal instantly established a US platform for DS Smith with 19 stateside facilities and 1,500 employees. At the time of the acquisition, Interstate Resources reported revenues of $618 million. DS Smith paid a total of $1.146 billion for 80% of the outstanding equity, suggesting a total enterprise value of $1.432 billion, or otherwise stated, an astounding 2.32 times trailing revenue. Although EBITDA figures of the acquired company were not disclosed by DS Smith, one analyst estimated the multiple paid at 13.1 times trailing EBITDA. Clearly a high-water valuation driven by the strategic goals of a well-heeled buyer.

On a smaller scale, Green Bay Packaging acquired Wisconsin Packaging. The acquired company operates a corrugated sheet plant and specializes in corrugated packaging and retail display. Green Bay Packaging, itself an active acquirer over the past several years, now has manufacturing facilities in 14 states.

Two countervailing trends are driving the deal activity in the corrugated segment of the industry. The most obvious driver is the “Amazoning” of the retail business. A friend of mine who lives in a 400-unit apartment building has remarked that the apartment complex’s hallways are lined with boxes at the end of each day, the result of online shopping deliveries. The recycling bins in the basement are clogged with flattened corrugated cartons.

On the other hand, bricks and mortar stores work to compete with the online juggernaut. Brands are constantly refreshing their in-store presence with new, more complex and multi-dimensional retail displays. Today’s stores are awash in floor stickers, decorated windows, and multi-media (sound, light, scents, etc.), alongside the old standby, corrugated retail displays. Those displays are still a cost-effective method to change out the retail space. It’s all part of the “experiential” retail environment.

Either way – online or in-store, corrugated products are in demand.

Commercial Printing and Diversified Services

Traxium, an up-and-coming Midwest roll-up in the commercial printing segment, has picked up steam. The company announced two new acquisitions, Watt Printers and Great Lakes Integrated, both in Cleveland, Ohio. Owners of commercial printers active in the industry groups will recognize Great Lakes as one of the pioneers in the transition of many commercial printing companies to marketing service providers, offering fulfillment and marketing services in addition to printing. The Traxium brand was launched in November 2016 when the owner acquired Printing Concepts, also in Ohio. The plan is to consolidate the print operations in the current Watt facility, while maintaining the separate Great Lakes fulfillment operation.

LSC Communications announced two transactions, continuing the steady drumbeat of deals for the company since being spun out of R.R. Donnelley in October 2016 (all told, we count at least eight acquisitions and two divestitures for LSC since its formation).

When LSC was split off, it was our opinion, shared by other industry analysts, that it was odd that the print logistics business was not originally included in the assets allocated to LSC. The postal optimization services in the logistics unit would logically have been more valuable to the publication printing plants which went to LSC in the split. LSC had apparently solved the problem of not having a logistics unit with the purchases, first of Fairrington Transportation (See The Target Report - Transformation and Rebirth), and subsequently of The Clark Group. Despite the two acquisitions, LSC has now announced the purchase of RRD’s Print Logistics business, which it will combine with Fairrington and The Clark Group. LSC will now have transportation and postal optimization capabilities exceeding even that of its former self within the larger R.R. Donnelley of yore.

LSC made another move to rationalize its print production assets, shedding its retail inserts business, selling the business and related production facilities to Trend Offset. Trend is headquartered in California, with additional plants in Texas and Florida. In the earlier divestiture, in September of 2017, LSC sold off its book components company, Moore-Langen Printing, which was acquired by Phoenix Color, a commercial, packaging and book printer owned by ALJ Regional Holdings.

Brand Automation

While we accept that it’s likely we will see self-driving vehicles on our roads in the near future, we often hear that some “soft skill” tasks would seemingly be beyond the grasp of automation. For example, the creation of a new logo to brand your startup company has been the domain of highly-trained and creative graphic designers. No longer; Deluxe Corporation announced the acquisition, for $43 million in cash, of LogoMix. The Boston-based online service uses proprietary artificial intelligence capabilities to offer clients self-service automated logo and branding design. The automated logo is purchased at a nominal price, delivered electronically, and instantly available for printing on business cards and promotional items, and for use in marketing campaigns (automated campaigns, of course).



2018 May - 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
Green Bay Packaging No Data Green Bay, WI Wisconsin Packaging No Data Fort Atkinson, WI 5/31/18 No Data Acquisition Retail display & packaging Link
Association of National Advertisers (ANA) No Data New York, NY Data & Marketing Association
(DMA)
No Data New York, NY 5/31/18 No Data Acquisition Trade association Link
Tronc $1,520 Chicago, IL The Virginian-Pilot Media Co's.
(Prop. Landmark Media Enterprises)
No Data Norfolk, VA 5/29/18 $34.0 Acquisition Regional newspapers Link
Nine Dragons Paper No Data Hong Kong ME & WI Paper Mills
(Dive Catalyst Paper)
$2,020 Richmond, BC 5/25/18 $175.0 Acquisition Paper mills Link
DS Smith $7,016 London, UK Corrugated Container Corp No Data Roanoke, VA 5/22/18 No Data Acquisition Retail display & packaging Link
CCL Industries $4,920 Toronto, ON Nortec International $9.6 Tel Aviv, Israel 5/22/18 $9.0 Acquisition Label printing Link
Perfect Finishing No Data Clifton, NJ 21st Century Finishing No Data Saddle Brook, NJ 5/22/18 No Data Acquisition
(Graphic Arts Advisors)
Bindery services Link
ABN AMRO Participaties No Data Amsterdam,
Netherlands
MPS Systems
(Port co. Braver Investments)
No Data Arnhem,
Netherlands
5/17/18 No Data Acquisition Flexographic presses Link
Mitchell's Speedway Press No Data Oswego, NY Phoenix Press No Data Phoenix, NY 5/15/18 No Data Acquisition Printing & copying Link
Gannett $3,100 McLean, VA WordStream No Data Boston, MA 5/10/18 $150.0 Acquisition Online advertising software Link
Deluxe $1,970 Shoreview, MN LogoMix No Data Boston, MA 5/9/18 $43.0 Acquisition Branding design & products Link
Traxium No Data Stow, OH Watt Printers No Data Cleveland, OH 5/8/18 No Data Acquisition
(New Direction)
Commercial printing Link
Traxium No Data Stow, OH Great Lakes Integrated No Data Cleveland, OH 5/8/18 No Data Acquisition
(New Direction)
Commercial printing Link
Grimco No Data Fenton, MO Pioneer Supply No Data Cinnaminson, NJ  5/3/18 No Data Acquisition Sign & screen print supplies Link
Ennis $370.2 Midlothian, TX  Allen-Bailey Tag & Label $12.0 Caledonia, NY 5/3/18 No Data Acquisition Tag & label printing Link
LSC Communications $3,710 Chicago, IL Print Logistics Business
(Div R.R. Donnelley)
No Data
($6,940)
Chicago, IL 5/2/18 No Data Acquisition Print & mail logistics Link
Trend Offset Printing $300.0 Los Alamitos Retail Insert Business
(Div. LSC Communications)
No Data
($3,710)
Chicago, IL 5/2/18 No Data Acquisition Retail newspaper inserts Link
ProAmpac
(Port co. PPC Partners)
No Data Cincinnati, OH Gateway Packaging
(Port co. Saw Mill Capital)
No Data White House, TN 5/1/18 No Data Acquisition Multi-wall packaging Link
Supremex $158.5 LaSalle, QC Groupe Deux Printing (G2)
(Inc. Pharmaflex Labels div.)
$12.0 Laval, QC 5/1/18 $11.6 Acquisition Folding cartons & labels Link


2018 May - 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:
BMP Media Holdings, LLC 5/21/18 No Data 18-11515 New York, NY 2nd Southern NY
New York
Mary Kay Vyskocil Sanford Philip Rosen Magazine publishing
Reliable Bookbinders Limited 5/14/18 No Data N/A Scarborough, ON N/A N/A N/A PwC - Trustee Perfect binding


2018 May - 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
One Source Communications 6/13/18 No Data Whippany, NJ None N/A May-18 Commercial printing
(Managed wind-down by Graphic Arts Advisors)
Link
Printworks 7/12/18 No Data Edmonton, AB None N/A May-18 Commercial printing Link
Hooven-Dayton  7/10/18 No Data Miamisburg, OH Branford Group Branford, CT 5/29/18 Labels & flexible packaging Link