The Target Report: Transition to Digital Printing Roils the Book Industry

Monday, August 5, 2013

Transition to Digital Printing Roils the Book Industry – July 2013 M&A Activity

Transactions in the book printing industry took center stage in July; the headline act was the Chapter 11 bankruptcy filing of Cengage Learning. The company is now moving rapidly to a digital strategy, as it seeks to shed more than $4 billion in debt through the bankruptcy process. CEO Michael Hansen, as reported by Bloomberg, squarely placed the blame on the company itself for not adopting digital quickly enough, due to the “belief that the print model would hold up better than it actually did.”

Private equity firm Castle Harlan increased its position in the book printing industry with its investment in Bookmasters, which has expertise in digital book printing. The deal was announced as a strategic partnership between Bookmasters and Castle Harlan’s existing portfolio company, Baker & Taylor, the world’s largest distributor of books and related materials. The two companies will continue to operate independent of each other.

Edward Brothers Malloy, formed in February 2012 with the merger of two book manufacturing companies, announced the closure of one of its two printing facilities in Ann Arbor, MI. John Edwards, CEO of the company, attributed the closure to a significant decline in the demand for longer runs which utilized the offset printing process. He also noted that the closure is consistent with the company’s strategic effort to grow its digital book printing business. The company is capable of the “distribute-then-print” model of content delivery, using its several remote digital printing facilities in the US, as well as its one facility in the UK.

Bucking the trend toward digital book printing, Publisher’s Graphics, an innovator in internet-based ordering and online sales of digitally printed books, acquired Corley Printing, a traditional offset book printer with capability to produce longer runs printed on offset presses.

Consolidation was once again the main act in the packaging industry, with an assist by private equity. Chicago PE firm Svoboda Capital Partners was back in the market. Svoboda acquired TVC Label and “bolted” the company onto its platform company, M.E.I. Labels, which it acquired in December 2012. Madison Dearborn Partners, also of Chicago, announced that it agreed to buy Multi Packaging Solutions from Irving Place Capital, preparing Multi Packaging Solutions for a second act in its growth from inception in 2005 to global player in the packaging industry. Back on the deal log for the third time in less than two years, publically traded Multi-Color Corporation acquired Flexo Print, a label printer in Guadalajara, Mexico.

Clarence Schawk, founder of the global image management company, once told me that he “did not want to own iron,” rather he preferred to remain firmly on the image and brand management side of the graphics business. True to this vision, Schawk, now rebranded at the corporate level as SGK, stuck to its script, selling its large format printing facility in Los Angeles, California. On the buy side of the transaction, and clearly articulating the opposite strategy, dedicated to being a technology-driven company, The Garvey Group purchased Schawk’s Los Angeles large format facility. Garvey is truly a company that likes the heavy iron, announcing last month that it bought a six-color UV-capable 64” offset press, the eighth KBA press in its troupe of oversize offset presses.

Ricoh purchased a minority interest in Avanti, one of the few remaining independent providers of printing management information systems (MIS). One day later, Hewlett-Packard announced that it was closing Hiflex, the print MIS system it purchased last year. Meanwhile, Electronics for Imaging (EFI) continues to dominate the print MIS business, having acquired and then discontinued numerous competitors. Will Ricoh succeed where HP failed?

The print management business (aka purchase aggregation and/or print outsourcing) was active in July. Innerworkings announced the acquisition of EyeLevel, a company which produces retail displays and fixtures in the Czech Republic. This follows the company’s acquisition last month of a packaging design and sourcing company in the UK. Another player in the print management space, Pitney Bowes, is bowing out of the business, selling its PB Management Services unit to Apollo Global Management. Apollo is the huge investment firm that proclaims its expertise to be contrarian, value-oriented investing, with significant distressed expertise. The print management business is changing – are these transactions signals that the overcapacity in the offset printing business might be lessening, possibly mitigating the advantages that endemic overcapacity afforded the print management firms? More on this topic to come in August!

July was another busy month for transactions in the printing and related industries – see the deal logs below for complete details and links to source articles.

2013 July - 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

Innerworkings

$813.5

Chicago, IL

EyeLevel

No Data

Prague,
Czech Republic

7/31/13

No Data

Acquisition

Retail displays & fixtures

2013 July - 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
Hiflex MIS Systems	Jul-13	No Data	Ashland, NY (NA Offices)	Hewlett-Packard (HP)	Palo Alto, CA	7/12/13	Printing MIS software	Link
Hess Print Solutions	Aug-13	No Data	Woodstock, IL	Bang Printing	Brainerd, MN	7/30/13	Plant closed after 363 sale to Bang Printing	Link
Edward Brothers Malloy - Printing Facility	Jan-14	No Data	Ann Arbor, MI	Edward Brothers Malloy	Ann Arbor, MI	7/30/13	Consolidation of book printing ops	Link

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Monday, August 5, 2013

Transition to Digital Printing Roils the Book Industry – July 2013 M&A Activity

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