Monday, January 6, 2020

The Penguin’s Native Tongue is Now German – December 2019 M&A Activity


Bertelsmann, the massive media company based in Germany, has announced that it will soon become the sole owner of Penguin Random House. Upon approval by regulators, which is expected, the company will purchase the remaining 25-percent of the joint-venture now owned by Pearson, the UK-based publisher that is shedding non-educational assets. Penguin, owned by Pearson, and Random House, owned by Bertelsmann, came together in 2013 to form the world’s largest book publishing group, bringing many familiar names under one roof. Much of the publishing industry had been in continuous “roll-up” mode for decades, similar to the printing industry; the joint-venture was one more continuation of that process. Previous acquisitions on both sides of the joint venture included well-known and respected publishing houses including Doubleday, Modern Library, Alfred A. Knopf, Pantheon, Ballantine Books, Bantam, Dell, and many others. 

One of the most famous and historic trade names of the combined entity was Penguin, surviving the latest merger and still enshrined on the company marquee, slated to remain the lead name in the new wholly-owned subsidiary of the Bertelsmann publishing division. The new entity will, amazingly, consist of more than 300 different brands or “imprints” under which the company publishes books. Similar to how the Volkswagen, Audi, Porsche and Bentley brands are all manufactured by one company but target different customers, all 300 imprints will be published under the overarching Bertelsmann umbrella, but marketed to different audiences and demographic segments. Like the VW Beetle, the Penguin imprint got its start in the 1930’s and was conceived as a low-cost alternative to traditional methods, effectively accomplishing its intended function, but priced to be affordable to the masses.

Penguin founder Sir Allen Lane had publishing in his blood. He rose quickly from apprentice to the position of managing editor at his uncle’s publishing company. Sir Allen took risks; he was the first to publish James Joyce’s highly controversial Ulysses in England (much later in life, taking another risk, he purposely published an uncensored edition of D.H. Lawrence’s Lady Chatterley’s Lover just to test the censorship laws in England). In 1934, when traveling back from a weekend visit with mystery writer Agatha Christie at her country home, he found himself without something to read and was aghast that the only reading material available at the train station were magazines and reprints of Victorian novels. Hence, the idea was born for inexpensive editions of quality literature, sold in vending machines and at non-traditional outlets for books such as tobacco stores and, of course, railway stations. Sir Allen priced the original editions equal to a pack of cigarettes, so low that some authors, including George Orwell, took it upon themselves to protest the idea which they believed would undermine the market for books.

The idea was not new, however. Several years before, a German company had established Albatross Books in Hamburg based on the same ideal of publishing inexpensive paperback versions of quality literature. Not only did Sir Allen adopt the use of a bird as the brand name and the logo, his books, like the German predecessor, were sized to approximate the proportions of the golden ratio, used modern sans-serif fonts, and eschewed the use of illustrations on the covers favoring instead simple graphic treatment with typography and color-coded by genre.


Dancing Penguin from 1938
The idea took off and eventually other publishers and authors agreed to sell Penguin the rights to publish an inexpensive paperback edition of their titles under the Penguin imprint. Penguin titles were primarily focused on great fiction (best-known for the orange banded covers) but also included crime novels (green), travel and adventure (pink), biographies (dark blue), drama (red), essays (purple), miscellaneous (yellow) and world affairs (grey). The success of the Penguin brand was followed up by Pelican Books (light blue) which published non-fiction titles, and then by Puffin Books for children. The original name for the brand was suggested by a typist listening in on Sir Allen’s conversation. He then sent a young staff member off to the London Zoo to draw the original Penguin logo. The logo morphed over the years, sometimes upright and stiff, other times happily dancing. Occasionally, the book was embellished with a pair of back-to-back dancing penguins, for reasons that are no longer obvious or explained.

According to recent reports, it appears that the market for printed books has stabilized, or at worst, is declining only slightly. Print, at least when it comes to books, is not dead, nor is the printed book on life support as appears to be the case for many newspapers and magazines. To support its commitment to printed communications, especially books, Bertelsmann’s subsidiary Bertelsmann Printing Group maintains a global staff in excess of 8,200 employees, with more than 20 manufacturing sites in Europe and the U.S. If it were a standalone company, the Bertelsmann Printing Group would be the largest printing company in Europe. On a global basis the company’s revenue is approximately $1.8 billion annually.

In the U.S., Bertelsmann has acquired several companies and operates plants that specialize in book printing and related services. Berryville Graphics, in Virginia, operates a highly automated hardcover and softcover book manufacturing facility. Coral Graphics, located on Long Island, New York, with additional facilities in Virginia and Kentucky, prints highly decorated book components including book covers, jackets and inserts. Offset Paperback Manufacturers (OPM), located in northeast Pennsylvania, produces several hundred million paperbacks each year. The U.S. operations combined employ 1,300 with revenues in excess of $230 million.

It’s been 88 years since two Germans and an Englishman launched the predecessor concept to Penguin Books in Hamburg. Through the vicissitudes of world events, Albatross Books was eventually shuttered and one of its founders emigrated to America and eventually headed up Penguin Books in the U.S., the successor to his own original concept. Later this year, the world’s leading company that produces inexpensive books produced for the masses goes home to roost in Germany.

Commercial Printing and Diversified Services

Walsworth, with reported revenues just shy of $180 million and based in Marceline, Missouri, announced the acquisition of Ripon Printers, located in Wisconsin. More than half of Walworth’s business is book manufacturing with a specialty in the production of yearbooks. The company also prints magazines, catalogs and general commercial work. With revenues of $50 million, the Ripon acquisition significantly moves the needle for Walsworth and brings additional catalog and magazine work to the mix, as well as direct mail and fulfillment services.

Print Management Services

Another global private equity investment firm has entered the marketing execution services business, suggesting that at least this firm of financial investors believes there is still more margin to squeeze out of suppliers in the marketing services supply chain. This time Blackstone, the third largest private equity firm in the world, has acquired a substantial minority interest in HH Global, the UK-based procurement and creative production company. Lest sellers of graphic communication products have any doubt about HH Global’s core deliverable, the company’s website makes it clear; their services, in order, are print procurement, point-of-sale procurement, packaging procurement, and promotional products procurement. Procurement.

Blackstone’s investment follows the acquisition of Williams Lea Tag by Advent International in 2017, now the tenth largest global private equity fund (See The Target Report: August 2017, Williams Lea Tag is on the Move). We expect that private equity’s entry into the mix portends even more competitive pricing pressure on suppliers when these print management service companies come knocking.



2019 December - 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
Sonoma Media Investments No Data Santa Rosa, CA Sonoma County Gazette $0.5 Forestville, CA 12/27/19 No Data Acquisition Community newspaper Link
Taylor Printing Group No Data Fredericton, NB Bounty Print (Nova Scotia Ops)
(Div. SaltWire Network)
No Data Halifax, NS 12/19/19 No Data Acquisition Commercial printing Link
Walsworth $179.3 Marceline, MO Ripon Printers $50.0 Ripon, WI 12/18/19 No Data Acquisition Commercial printing Link
Delta Media Group
(Affil. O'Rourke Media Group)
No Data Kiel, WI Ripon Commonwealth Press No Data Ripon, WI 12/18/19 No Data Acquisition Community newspaper Link
Bertelsmann $19,600 G├╝tersloh, Germany Penguin Random House No Data New York, NY 12/18/19 $675.0 Buyout of Minority Book publisher Link
The Daily Gazette No Data Schenectady, NY The Recorder
(Prop. McClary Media)
No Data Amsterdam, NY 12/16/19 No Data Acquisition Community newspaper Link
Greg Ellison No Data Denver, CO SpeedPro Denver No Data Denver, CO 12/13/19 No Data Acquisition Wide format franchise Link
Fineline Technologies
(Port co. Summit Partners)
$110.0 Norcross, GA Consolidated Printing No Data Van Buren, AR 12/12/19 No Data Acquisition Ticket printing Link
Palm Beach Media Group
(Sub. Hour Media Group)
No Data Troy, MI Gulfstream Media Group No Data Ft. Lauderdale, FL 12/11/19 No Data Acquisition Magazine publisher Link
Tenex Capital Management No Data New York, NY Orbus Exhibit & Display Group No Data Woodbridge, IL 12/5/19 No Data Acquisition Trade show displays Link
Blackstone No Data New York, NY HH Global No Data London, UK 12/3/19 No Data Minority Interest Marketing execution services Link
Bloom Family Sir Speedy No Data Westbury, NY BigTime Designs No Data Hauppauge, NY 12/1/19 No Data Acquisition Wide format printing Link


2019 December - 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:
Print Mates, Inc.
(Div. Generation Next Franchise Brands, Inc.)
12--15-19 No Data 19-17923 San Diego, CA 9th Nevada
Las Vegas
Mike K. Nakagawa Matthew C. Zirzow Photobooks & photo products
G&A Label, Inc. 12/4/19 No Data 19-32013 El Paso, TX 5th Western TX
El Paso
H. Christopher Mott Carlos A. Miranda Label printing
Chapter 7 Filings:
Octagon Graphics, LLC 12/11/19 No Data 19-11687 Safety Harbor, FL 11th Middle FL
Tampa
Michael G. Williamson  Kevin A. Comer Wide format digital & screen printing
Chapter 15 Filings:
Lecta Paper UK, Ltd. 12/19/19 19-13990 Barcelona, Spain 2nd Southern NY
New York City
Michael E. Wiles  Robert H. Trust Pressure sensitive papers


2019 December - 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
Ten Publishing Dec-19 No Data El Segundo, CA N/A None 12/6/19 Closing 19 automotive titles Link