Sunday, August 7, 2022

Cenveo Returns to its Roots – July 2022 M&A Activity


Good Times in the Envelope Business

In what appears to be a positive end to a long and tortuous road, the management team of Cenveo has completed a management buyout of the company. The Burton family, which has effectively controlled the company since 2005, is now collectively the majority shareholder, with the balance of the equity owned by other senior executives.

Cenveo, which started as an envelope manufacturer over one hundred years ago, and at one time seemed bent on acquiring anything but envelope manufacturers, has now been pared back down to its core. What remains is an envelope printing and converting powerhouse. According to the press release announcing the management buyout, “Cenveo is now exclusively an envelope focused business and the largest envelope converter in North America.”

The management buyout transaction may be an example of brilliant strategic planning, or simply good luck getting the timing just right. The envelope business has gone from being a highly price-sensitive commodity business to become a critical component in the print-centric direct mail and transactional document supply chain. For those readers of The Target Report who are not intimately familiar with the printing business, let’s just say that printers and mailers have been scrambling to obtain sufficient quantities of envelopes to complete customer orders. With the ongoing paper shortage (see Paper Industry in Transition – May 2022), converters have resorted to filling orders with brown paper stocks that are more difficult to convert into envelopes and tougher for direct mail printers to process, in lieu of normally widely available standard white paper.

The supply-demand curve has inverted, envelopes are in demand and in short supply. Presumably, this has been good for envelope manufacturers, at least until the market comes back into balance. Cenveo is, finally, in a good spot.

Cenveo – Unwinding a Roll-Up

When we last wrote about Cenveo’s stream of divestitures, in the fall of 2020, the company had just completed the sale of its Cenveo Worldwide Publisher Services division to CJK Group. This transaction followed right on the heels of the sale of a publication printing plant in Pennsylvania and a fulfillment and digital printing plant in Maryland, both sold to Intellicor, a Pennsylvania-based direct mail roll-up. In addition to these divestitures, Cenveo completed a long string of plant closures, wrapping up with the shutdown of the former Cadmus Communications publication printing plant in Richmond, Virginia. These were only the most recent transactions in a steady drumbeat of divisional sales and plant closures, all surrounding the filing for Chapter 11 bankruptcy protection in 2018. Throughout all this churning, it was difficult to discern if there was any rhyme or reason to the unwinding. The divisions that most printing-related companies would consider to be prize assets, such as manufacturers of folding cartons, shrink sleeves, and labels - all went on the chopping block. There was even, in the midst of the frenzied disassembly, a sale of an envelope company, Quality Park Envelope in Minneapolis, to LSC Communications. If management was executing a planned strategy to convert the conglomerate to a pure envelope company, it was nonetheless not apparent at the time (see CJK Goes Global as Cenveo Unwinds – September 2020).

The Picture Gets Clear

In August 2021, the printing world learned that a new consolidator in the commercial printing segment had stepped up to the big stage and acquired the commercial printing business of Cenveo, including three large printing facilities in Eureka, Missouri, Amarillo, Texas, and San Antonio, Texas. With financial backing from JAL Equity, the consolidator had quietly built up a national network of 15 printing plants. The new entity was named ColorArt, an apparent homage to the Missouri plant’s original owner before being acquired by Mail-Well, the predecessor to Cenveo (more on this later). With this sale, Cenveo took itself out of the highly competitive commodity-level high-volume commercial printing business.

Once more staying in the divestiture mode, Cenveo unloaded its Custom Labels Group, in a sale earlier this year, to Brook + Whittle, the label, shrink sleeve and flexible packaging roll-up currently backed by Genstar Capital. Now distilled down to purely an envelope manufacturing company, Cenveo was poised for the management buyout.

How did it get this Crazy?

Cenveo traces its roots back to 1919 when two entrepreneurs moved west from Missouri and founded the Rocky Mountain Envelope Company. With the rapid economic growth of the Denver region, the company took off, along with many other “Rocky Mountain” brands, so the founders completed the first rebranding and began manufacturing “Mail-Well” products under the new corporate name, Rockmont Envelope Company.

It was all envelopes until the late 1950s when the company made some modest inroads into printing stationery and paper bags. In 1960 Rockmont began to diversify, first into school supplies, notebooks, memo pads and tablets. The company rebranded once again as Pak-Well, with Rockmont Envelope now structured as the company’s subsidiary. The company did not escape the early 60’s go-public craze for mid-size manufacturers and was taken public when revenue was slightly more than $13 million. In addition to its home base of Denver, Colorado, the company had manufacturing plants in Portland, Houston, Phoenix, Los Angeles, Salt Lake City, and Honolulu.

Reported earnings were never stellar. In the early 1970s, the company posted net earnings of only $1.74 million on sales of $53.8 million (3.23%), establishing a trend of low margins that would continue as the company grew.

Through a series of transactions, Pak-Well eventually became part of the paper company Great Northern Nekoosa Corporation, which subsequently was rolled into Georgia-Pacific in 1990. By this time, the division was back to strictly producing envelopes under the Mail-Well brand, as well as under the Wisco Envelopes brand.

The low margin envelope business was spun out of Georgia-Pacific in 1993 as the Mail-Well company, with 16 manufacturing plants (remember this number) that produced about 13 billion envelopes annually. Leverage was high, with $17 million in equity supporting $142 million of debt, another trend that would continue. Acquisitions were on the table from jump, including the 1994 purchase of American Envelope Company and the addition of Canadian envelope manufacturing Supremex in 1995 (subsequently one of the first spin-offs under Cenveo in 2005). In 1995 the company went public once again, decreasing leverage, although not for long. Margins remained tight, with reported net income of $8 million on sales of $597 million (1.34%).

1995 also marked the diversion of Mail-Well away from the commodity printed products business and into the business of very high-quality commercial printing, with the acquisition of the Graphics Arts Center in Portland, Oregon. Instead of plain-Jane envelope products, Mail-Well had entered the business of technologically-advanced high-craft printing of critical color marketing materials, such as annual reports and automotive brochures. It had also begun to compete in the business of providing trade printing services to the distributor market, with the acquisition of Murray Envelope in Mississippi.

Mail-Well was on a tear, competing with Consolidated Graphics to see which company could acquire more, faster. In 1998 alone, Mail-Well rang up 23 acquisitions, including the purchase of creme de la creme commercial printing company Anderson Lithograph in Los Angeles. The same year, the company entered the packaging business with the purchase of the label division of Lawson Mardon Packaging. In May of that year, Mail-Well completed a simultaneous merger with seven commercial printing companies in an exchange of stock, the largest of which was St. Louis-based Color Art with revenue of $75 million. By 1998, Mail-Well boasted revenue of $1.5 billion. However, net income remained a dismal, in relative terms, $21.7 million (1.45%).

Things began to sour in 2000, when the company reported sales of $2.43 billion and net income of $27.6 million (1.14%). The company now employed in excess of 13,000 people across the US and Europe, operating 110 printing plants. The turn of the millennium also marked the beginning of a long-drawn-out phase of restructuring, merger of operating divisions, and closure of facilities. The company rebranded again in 2004 to the somewhat perplexing name “Cenveo” (Rockmont Envelope anyone?)

The dealmaking days were not over, however, and in 2007 Cenveo purchased Cadmus Communications, further diversifying the company as a major provider of content management and production of scientific, technical, and medical journals.

In what now appears to have been a prescient move, Cenveo’s last major acquisition was the purchase of bankrupt National Envelope in 2013. The deal, structured as a 363 sale in the bankruptcy proceeding, was a bargain, reported to be $25 million for a $300 million revenue business. With this transaction, the latest in a string too long to recite here, the company returns to its roots. Cenveo is now an envelope manufacturer, producing approximately 50 billion envelopes annually in 14 plants across the US.

The question remains, can the new owners of Cenveo stick to the core business and when the time comes to grow once again by acquisition, will the path be clearly defined, strategically adjunctive, and financially accretive to the company?

Addendum - Other Envelope Players

Earlier this year in March, Tension Corporation, one of the largest manufacturers of envelopes in the US, announced the acquisition of the print division assets of Intellus Direct. The acquired division is the successor to the former IBS Direct, a direct mail and envelope converter located in King of Prussia, Pennsylvania. The plant operated under the short-lived name Intellus Marketing, a direct mail roll-up which acquired the IBS Direct plant in 2018, among other assets now sold off.

A new envelope manufacturing platform company with private equity backing was announced in July. CenterGate Capital, based in Austin, Texas, purchased United Envelope. The acquired company is based in Ridgefield, New Jersey and has additional manufacturing locations in Pennsylvania and Ohio. CenterGate is seeking add-ons in the envelope segment. However, not content to keep its focus strictly on envelopes, CenterGate also states that it will consider add-ons in flexible packaging, folding cartons, paper-based products, and other graphic arts services.
   
2022 July - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenue
(US$Mil)


Party #1 Address


Deal Party #2
Pre-Deal
Revenue
(US$Mil)


Party #2 Address
Date
Deal
Public
Deal
Value
(US$Mil)

Deal Structure
(Intermediary)


Notes
Link
WestRock $20,940 Norcross, GA Grupo Gondi No Data Mexico City,
Mexico
7/27/22 $1,763.0 Acquisition Paperboard mills & packaging Link
JBF Finance No Data Buchillon,
Switzerland
Bobst Group $1,670 Lausanne,
Switzerland
7/25/22 $622.1 Acquisition Printing & finishing equipment Link
Koenig & Bauer (KBA) $1,163 Wurzburg, Germany Celmacch Group No Data Brescia, Italy 7/22/22 No Data Minority Interest Flexo presses for corrugated Link
Mill Rock Packaging
(Port co. Mill Rock Capital)
No Data New York, NY Impressions No Data St. Paul, MN 7/18/22 No Data Acquisition Folding cartons Link
LBS No Data Des Moines, IA Cover Material Sales No Data Hyannis, MA 7/18/22 No Data Acquisition Specialty paper distributor Link
United GMG No Data Elk Grove Village, IL Lightbox Graphix No Data Mount Prospect, IL 7/18/22 No Data Acquisition Signage & wide format Link
Crisp Imaging No Data Costa Mesa, CA Coastal Reprographics No Data San Luis Obispo, CA 7/14/22 No Data Acquisition Reprographics & wide format Link
CenterGate Capital No Data Austin, TX United Envelope No Data Ridgefield, NJ 7/13/22 No Data Acquisition
(CIBC)
Envelope manufacturing Link
Dynos No Data Troisdorf, Germany Cheney Pulp and Paper No Data Franklin, OH  7/13/22 No Data Acquisition Natural fiber paper pulp Link
Mayr-Melnhof Group $3,490 Vienna, Austria Essentra Packaging (UK & US)
(Div. Essentra)
$440.0 Oxford, UK
Westchester, IL
7/12/22 $371.0 Acquisition Folding cartons & labels Link
Relyco No Data Dover, NH Business Forms No Data Roanoke, VA 7/11/22 No Data Acquisition Business forms Link
The Graphics Shop
(Div. Hackworth Reprographics)
No Data Chesapeake, VA Balco Sign & Safety No Data Virginia Beach, VA 7/11/22 No Data Acquisition Safety sign printing Link
Plockmatic
(Sub. Grimaldi Industri Group)
No Data Hägersten, Sweden Intec Printing Solutions No Data Poole, UK 7/11/22 No Data Acquisition Print finishing equipment Link
Cenveo Mngt Team No Data Stamford, CT Cenveo No Data Stamford, CT 7/11/22 No Data Mngt. Buyout Envelope manufacturing Link
Tenex Capital No Data New York, NY Oliver Printing & Packaging
(Port co. Pfingsten Partners)
No Data Hauppauge, NY 7/11/22 No Data Acquisition Folding cartons Link
Yankee Publishing ESOP No Data Dublin, NH Yankee Publishing No Data Dublin, NH 7/8/22 No Data Sale to ESOP
(Atlantic Mngt)
Magazine publishing Link
SupplyLogic
(Port co Inverness Graham)
No Data Kansas City, MO WebbMason No Data Hunt Valley, MD 7/7/22 No Data Merger Print & brand management Link
Paper Excellence No Data Richmond, BC Resolute Forest Products $3,740 Montreal, QC 7/6/22 $2,700 Acquisition Paper & pulp products Link
Electronics for Imaging (EFI)
Port Co. Siris Capital Group
No Data Foster City, CA CADlink Technology No Data Ottawa, ON 7/5/22 No Data Acquisition Graphic production software Link

   
2022 July - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenue
(US$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:
Bill's Prestige Printing, Inc 7/28/22 No Data 22-02691 Eustis, FL 11th Middle FL
Orlando
Grace E. Robson Michael E. Golub Printing & copying
Royal Graphics, Inc. 7/14/22 No Data 22-+07848 Downer's Grove, IL 7th Northern IL
Chicago
Janet S. Baer William D. Cherny Commercial printing

   
2022 July - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenue
(US$Mil)



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
Challenge Graphics 8/25/22 No Data Deer Park, NY None N/A Jul-22 Commercial printing Link

Friday, July 8, 2022

Commercial Print Awakes from M&A Slumber – June 2022 M&A Activity


Commercial Print M&A Activity Falls During Covid Period

In the three years leading up to the pandemic that broke out in early 2020, M&A activity in the commercial printing segment, as we define it,* averaged 43 transactions per year. For the past two years, the number of M&A transactions in the commercial printing segment has fallen to 25 and 26 in each year, respectively, or otherwise stated, approximately two per month.

During the prior twelve months leading up to the end of the second quarter of 2022, there was one month with no M&A deals in the segment and four months with only one deal that we counted in the commercial printing segment. Of the 26 transactions in the twelve months ended June 2022, five of those occurred in just the past month. These numbers contrast with what we found in 2013, two years after we started the Target Report, when the average number of transactions in the commercial printing segment was close to 6 per month, every month. 

It is too soon to tell whether this might portend a return to the norm of the pre-pandemic era, however the nature of the transactions suggests some trends that are likely to continue even if the deal count does not.

Companies Do Not Live on Print Alone

Post Capital Partners announced the acquisition of Ironmark, a diversified provider of marketing production services located in Annapolis Junction, Maryland. The acquired company was originally focused solely on printing services and operated from 1955 to 2011 under the banner Frank Gumpert Printing. In 2011, the company merged with Corporate Printing Solutions and was renamed CPS Gumpert. According to the company’s website, the combined entities grew and began offering a multitude of graphic and marketing services in addition to traditional offset printing, expanding into digital and large format printing, graphic design and web development, event promotions, promo products and e-comm services.

In the press release announcing the purchase of Ironmark and establishment of the firm as a new platform for future investments, Post Capital introduces Ironmark to its audience as an “image company” with plans to “further build upon its omni-channel marketing delivery platform.” While not eschewing the company’s roots in printing, noting that Ironmark has a “strong legacy in print-based marketing solutions,” the announcement elaborates that the company “provides a fully-integrated suite of services including commercial print (digital, offset and wide-format), digital marketing and web development, creative agency, promotional products management and a range of logistics services including procurement, warehousing, kitting, mailing, and e-commerce fulfillment, which enables its customers to realize the benefits of spend and vendor management consolidation with a single, omni-channel provider.” The message is clear, this is not your grandfather’s printing company. Rather, this new platform within the private equity universe is a marketing services production engine.

Also in June, Graphic Village announced the purchase of Sunrise Hitek Group in Chicago. The acquired company provides a wide variety of printed products and extends Graphic Village’s footprint west to Chicago. Based in Cincinnati, Ohio and with backing from Revitalize Capital, Graphic Village has been a serial acquirer of a diversified collection of graphic service providers. Similar to Ironmark, Graphic Village has its beginnings as a pure commercial printer. Bramkamp Printing, a commercial printer, served as the core company, cross-selling services with other Cincinnati graphic companies including DocuPros Digital Printing, Premier Mail and Fulfillment, Everything’s Image apparel decorating, and Quality Custom Binders. Bramkamp and DocuPros eventually merged, taking on the name of the consortium Graphic Village as the new graphic services platform for Cincinnati-based private equity firm Revitalize Capital. 

Well down the pathway to being a diversified marketing services production provider, the first words on Graphic Village’s website set the tone with “Welcome to Graphic Village, your multichannel marketing solutions provider.” The inference is clear, this is not your run-of-the-mill printing company. (For more about Graphic Village’s acquisition journey, (see Regional Print Consolidator Builds Diverse Offerings - May 2020). 

Regional, Not National, Consolidation

In addition to extolling the virtues of its expanded services, Graphic Village explicitly noted that the location of the acquired company, Chicago, was a key strategic rationale behind the acquisition. This aligns with another clear trend we have noted. Healthy commercial printing companies are building out a regional network of locations via acquisition, in contrast to leaping right from a central base to a national strategy of networked commercial printing companies. That concept, which was the strategy du jour at the turn of the century, eventually faded as Consolidated Graphics (CGX), Cenveo (né Mailwell), Printing Arts America, and Nationwide Argosy, among others, all were acquired, absorbed, deconsolidated, or simply disintegrated back into separate printing companies. 

Representative of the current trend to build out regionally, Paper Airplane, a commercial printing company based in Birmingham, Alabama, acquired Colonial Printing and Packaging, located in Huntsville, Alabama. Paper Airplane announced that it was assuming operations at the Huntsville location and would offers services there as well as at its headquarters in Birmingham. The new location is approximately an hour and a half away, a good example of the regional trend consolidation trend we have seen elsewhere (see Commercial Printing: Consolidation or Regional Expansion? – November 2019).

There are exceptions to this regional consolidation trend. Missouri-based ColorArt, with backing from JAL Equity, has rapidly built up a network of acquired commercial printing companies, with locations ranging from Southern California and Las Vegas in the west, a smattering of locations in every state that connect from New Mexico all the way up to Michigan, east to Long Island in New York, and down to Florida. Ironically, in its most notable transaction, in June 2021, ColorArt acquired the commercial print division of the disintegrating Cenveo which included three major printing facilities (see CJK Goes Global as Cenveo Unwinds – September 2020). More recently, in February 2022, ColorArt acquired Cockrell Enovation, a commercial printing company in Fort Worth, Texas. The strategy is clearly national, opportunistic, and primarily print-centric.

In another twist of the patchwork of consolidation, deconsolidation, and re-consolidation, earlier this year the aforementioned regional consolidator Graphic Village picked up the Cincinnati division of formerly active consolidator OneTouchPoint. With backing from ICV Partners, OneTouchPoint was an active national player and an early proponent of layering marketing services on top of a network of print providers. However, OneTouchPoint has gone quiet on the buy side since right before the pandemic broke out in February 2020, when the company acquired Bluewater, a digital marketing services company. It remains to be seen if the sale of the Cincinnati operation to Graphic Village is a one off divestiture or the beginning of another deconstruction.

We have no doubt that these two trends will continue, exemplified by the recent uptick in deals within the broadly defined commercial printing segment. The stronger players will continue to move upstream from pure print providers and superimpose a myriad of marketing services on top of their basic analog and digital print capabilities. Some of those same top performers will also see regional expansion as their best path to growth since the overall market is, depending on who you ask, either stable or declining, but not increasing.

*In our lexicon, we draw a wide circle around the term “commercial printing” to include everything from the main street print and copy shops up to and including RR Donnelley. In essence, if the printed product of the acquired company is primarily used for marketing purposes, versus labels or folding cartons, for example, then we classify the transaction within the overall commercial printing category.

2022 June - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenue
(US$Mil)


Party #1 Address


Deal Party #2
Pre-Deal
Revenue
(US$Mil)


Party #2 Address
Date
Deal
Public
Deal
Value
(US$Mil)

Deal Structure
(Intermediary)


Notes
Link
Green Bay PackagingNo DataGreen Bay, WIInterstate PackagingNo DataAlbert Lea, MN6/30/22No DataAcquisitionCorrugated cartonsLink
Fortis Solutions Group
(Port co. Harvest Partners)
No DataVirginia Beach, VAAnchor PrintingNo DataNovi, MI6/30/22No DataAcquisitionLabels & flexible packagingLink
Post Capital PartnersNo DataNew York, NYIronmarkNo DataAnnapolis Junction, MD6/22/22No DataAcquisitionMarketing production servicesLink
Carpenter Newsmedia
Affil. Boone Newspapers
No DataNatchez, MSDaily News of Bowling GreenNo DataBowling Green, KY6/22/22No DataAcquisition
Cribb, Cope & Potts
Community newspapersLink
TC Transcontinental$2,176Montreal, QCBanaplastNo DataArmenia, Colombia6/22/22No DataAcquisitionFlexible packagingLink
Central National Gottesman$6,200Purchase, NYLewis Paper InternationalNo DataAddison, IL6/20/22No DataAcquisitionPaper & supplies distributionLink
Association for PRINT Technologies (APTech)No DataFranklin, TNWhatTheyThinkNo DataSt. Paul, MN6/15/22No DataAcquisitionPrinting industry publisherLink
iSignNo DataBoyertown, PAAcorn Sign GraphicsNo DataRichmond, VA6/15/22$0.1363 Sale in Ch. 11Signage businessLink
Syracuse Label & Surround PrintingNo DataNorth Syracuse, NYMacaran Printing ProductsNo DataCohoes, NY6/13/22No DataMergerLabel printingLink
Minuteman Press Spokane ValleyNo DataSpokane Valley, WALancer Ltd. Commercial PrintingNo DataSpokane Valley, WA6/10/22No DataAcquisitionPrinting & copyingLink
SummaNo DataGistel, BelgiumValianiNo DataCertaldo, Italy6/9/22No DataAcquisitionFlatbed cutting devicesLink
Paper AirplaneNo DataBirmingham, ALColonial Printing and PackagingNo DataHuntsville, AL6/8/22$3.0AcquisitionCommercial printingLink
Fujifilm$22,500Tokyo, JapanUnigraphicaNo DataLiechtenstein6/8/22No DataAcquisitionPrinting system integratorLink
Electronics for Imaging (EFI)
Port Co. Siris Capital Group
$1,020Foster City, CAInèdit SoftwareNo DataBarcelona, Spain6/8/22No DataAcquisitionTextile printing softwareLink
Orbus Exhibit & Display Group
Port co. Tenex Capital Management
No DataWoodbridge, ILSEG Systems & ServicesNo DataCharlotte, NC6/6/22No DataAcquisitionRetail displaysLink
Graphic Village
(Port co. Revitalize Capital)
$22.0Cincinnati, OHSunrise HitekNo DataChicago, IL6/5/22No DataAcquisitionCommercial printingLink
Sigler CompaniesNo DataAmes, IAAlphaCopies (w/ FastSigns)No DataAmes, IA6/2/22No DataAcquisitionPrinting & copyingLink
A/E Graphics |Epic ColorNo DataBrookfield, WIB&L Graphic SolutionsNo DataJackson, WI6/2/22No DataAcquisitionWide format printingLink


2022 June - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenue
(US$Mil)



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
Premier Modern Commercial Printing Company6/7/22No Data22-41296Burleson, TX5thNorthern TX
Fort Worth
Edward L. MorrisMichael S. MitchellCommercial printing
Chapter 7 Filings:
No Chapter 7 Filings Found this Month---------------------------


2022 June - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenue
(US$Mil)



Closing Address
Related PartyRelated Party
Address
Date Closure Public


Notes

Press
Releases
No Plant Closures Found this Month------------------------