Tuesday, December 7, 2021

Slugfest Breaks Out Over RR Donnelley – November 2021 M&A Activity


You’ve heard it. I’ve heard it. Print is Dead. If that is true, why did two private equity heavyweights, both of which are already invested in print and paper, get into a slugfest and bid up the share price of RR Donnelley (RRD)?

The deal is not done, so there still might be an opportunity for Atlas Holdings, the challenger, to rise up and get back into the ring, however that appears unlikely at the time of this report. Atlas made a good show of it and had clear reasons to enter the fight. As the owner of LSC Communications, which itself was spun off of RRD in October 2016, Atlas’ bid held out the tantalizing possibility that two of the three formerly conjoined business units would be reunited under one ownership. Heads must have been spinning about the possibilities. Alas, Atlas got knocked out in the last round, beaten out by the tenacious, persistent parrying, blocking and punching by Chatham Asset Management.

Chatham had been preparing for this fight for quite a while, bulking up on RRD’s common stock and gathering bench strength as the largest holder of RRD’s debt, both of which Chatham suggested would be converted to equity or subordinated in the restructured company, a huge advantage in the final rounds.

When the match between Atlas and Chatham seemed like it was all over, a mysterious contender slipped under the ropes via a “go shop” provision and jumped into the ring. Keeping its identity a secret, the mystery bidder punched above the fray with an offer that was ten percent higher than Chatham’s second offer which had been seemingly insufficient to dislodge Atlas. That did it. Chatham came back with a third bid and topped the mystery offer. As the final blow to settle the contest, Chatham also agreed to pay for any wounds it had inflicted on Atlas, offering to pay RRD’s $20 million termination fee due to Atlas for breaking up. RRD rang the bell and declared Chatham Asset Management the winner.

(Click chart to enlarge)

While the contenders slugged it out and went the full ten rounds in a battle for control of RRD, the value of stockholder’s equity shot up from a dismal low of less than $100 million at the trough of the market after the pandemic broke out, topping out at the conclusion to more than three quarters of a billion dollars. Total enterprise value, including equity and debt, was reported to have reached in excess of $2.1 billion.

Neither Chatham nor Atlas are strangers to the world of print and paper-based industries. They know what they are getting into. It’s true that these sophisticated financial players move in on their targets when company situations are advantageous to a buyer, such as Chatham did by building a position when RRD’s stock and debt values were depressed, or by acquiring companies in bankruptcy proceedings. Nonetheless, they must perceive significant value in the assets, or they would not be in the hunt for these companies.

Chatham Asset Management is a major player in the newspaper industry, including its investment in McClatchy, the publisher of over 30 newspapers. Chatham acquired the McClatchy assets in the 363 sale process in McClatchy’s bankruptcy proceeding. (see Buyers are On The Move and On Track, Newspaper Publishing – July 2020).

Atlas Holdings will be known by many in the printing industry for its take-private acquisition of LSC Communications, the RRD spinoff that is the largest book manufacturer in the US, as well as a major US printer and distributor of magazines. Atlas also owns several paper manufacturing companies, including Finch Paper, which in turn acquired French Paper Company, Twin River Paper Company, Marcal Paper, and is currently in negotiations to acquire coated paper manufacturer Verso. Atlas also has investments in packaging with its portfolio company ASG AGI-Shorewood Group.

For those of us who have dedicated our careers to the printing and related industries, it’s nice to know that we are in the company of these Masters of the Universe* who see value in and have placed their bets on businesses that print.

Commercial Printing

CJK Group, the privately owned consolidator that has focused on book manufacturing and journal printing, jumped back into the market with the acquisition of Times Printing, a large web and sheetfed printing facility in Random Lake, Wisconsin. The acquired company was formerly part of the late Nicholas Karabots’ Kappa Media Group. The plant produces magazines, catalogs and commercial printing in a wide variety of finished sizes, with some short cut-off size capabilities.

Packaging

The consolidation of the packaging industry continues unabated. Inovar Packaging Group, a portfolio company of AEA Investors, acquired Dion Label Printing, located in Westfield, Massachusetts. Inovar is a portfolio company of AEA Investors. Dion Label is a printer and converter of prime labels, OTC pharmaceutical labels and specialty medical labels.

ProAmpac, headquartered in Cincinnati, Ohio, acquired Irish Flexible Packaging and related company Fispak, both in Ireland. The acquired companies manufacture waxed paper and specialty wraps for meats, cheeses, and bread products. Currently backed by Pritzker Private Capital, ProAmpac has been rolling up the flexible packaging segment steadily since its formation in 2015 with the merger of Ampac and Prolamina. The company has branched out recently in products such as wraps and bags (see Bags, Pouches, Trays & Bowls – December 2020).

ProMach, a manufacturer of packaging machinery, acquired CL&D Graphics, a specialty printer and converter of roll-fed film, labels, shrink sleeves, pouches, lids, and preprinted thermoformed packaging. The acquisition would appear to be a new strategic direction for ProMach, providing the packaging materials in addition to the machinery.

TC Transcontinental, the largest printing company in Canada, continued its evolution into a packaging and retail display company, moving steadily away from its legacy position as a publisher and printer of newspapers and magazines, with the acquisition of H.S. Crocker (see Getting Flexible in Your Middle Years - April 2018). The acquired company has revenues of $50 million and operates two facilities, in Huntley, Illinois and Exton, Pennsylvania.




* “Masters of the Universe” from The Bonfire of the Vanities by Tom Wolfe, 1987, referring to highly successful financial business experts.
     
2021 November - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

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

Party #1 Address

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

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

Notes
Press
Release
Chatham Asset Management No Data Chatham, NJ RR Donnelly $4,940 Chicago, IL 11/30/21 $1,200 Acquisition Diversified printing services Link
Lindenmeyr Munroe
(Div. Central National Gottesman)		 $6,200 Purchase, NY Paterson Papers No Data Paterson, NJ 11/30/21 No Data Acquisition
(DAK Group)		 Paper distribution Link
Frost River No Data No Data On The Limit No Data Duluth, MN 11/29/21 No Data Acquisition Screen printing apparel Link
Inovar Packaging Group
(Port co. AEA Investors)		 No Data Dallas, TX Dion Label Printing No Data Westfield, MA 11/17/21 No Data Acquisition Label printing Link
Sydney Stone No Data Mississauga, ON Philips Graphics Services No Data Mississauga, ON 11/15/21 No Data Acquisition Printing equipment services Link
New State Capital Partners No Data Larchmont, NY Wilmington Paper No Data Pinebrook, NJ 11/12/21 No Data Acquisition Paper recycling Link
Bobst Group $1,642 Mex, Switzerland Groupo Cerutti No Data Casale Monferrato,
Italy		 11/11/21 No Data Acquisition Gravure printing presses Link
Tjoapack No Data Etten-Leur,
The Netherlands		 Pharma Packaging Solutions
(Div. Carton Services)		 No Data Clinton, TN 11/8/21 No Data Acquisition
(Mesirow)		 Folding cartons & blister packs Link
ProAmpac
(Port co. Pritzker Partners)		 No Data Cincinnati, OH Irish Flexible Packaging / Fispak No Data Wicklow, Ireland 11/4/21 No Data Acquisition Flexible packaging Link
ProMach
(Port co Leonard Green & Partners)		 No Data Covington, KY CL&D Graphics / CL&D Digital No Data Hartland, WI 11/2/21 No Data Acquisition Labels & flexible packaging Link
TC Transcontinental $2,520 Montreal, QC H.S. Crocker Co. $50.0 Huntley, IL 11/2/21 No Data Acquisition
(Blaige & Company)		 Labels & die cut lids Link
Team Concept Printing No Data Carol Stream, IL Guardsman Laminating No Data Bensenville, IL 11/2/21 No Data Acquisition Bindery services Link
BlueCrest
(Port co. Platinum Equity)		 No Data Danbury, CT Fluence Automation No Data Arlington Heights, IL 11/1/21 No Data Acquisition Sorting equipment Link
CJK Group No Data Brainerd, MN Times Printing
(Div. Kappa Publishing)		 No Data Random Lake, WI 11/1/21 No Data Asset Acquisition Commercial printing Link

      
2021 November - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party
Date
Case
Filed		 Pre-Petition
Revenues
(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:
Screen-It, Ltd. 11/23/21 No Data 12-11076 Troy, NY 2nd Northern NY
Albany		 Robert E. Littlefield, Jr. Francis J. Brennan Screen printing apparel & promo

   
2021 November - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility
Date of Closure		 Pre-Closure
Revenues
(US$Mil)


Closing Address		 Related Party Related Party
Address		 Date Closure Public


Notes
Press
Releases
Nieman Printing 12/15/21 $29.2 Dallas, TX None N/A Nov-21 Commercial printing Link
IWCO - Mailing facility Jan-22 No Data Little Falls, MN IWCO Chanhassen, MN Nov-21 Mail processing services Link
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Sunday, November 7, 2021

The End of the Dotcom Era – October 2021 M&A Activity


The printing industry had its own dotcom boom and bust. It was at the end of the last millennium and the big Print show held at McCormick Place in Chicago was all abuzz about the dotcom companies that were invading the industry. These upstarts were making big promises that they represented the new way that printers and their customers would come together via automated internet-based platforms. The star of the show was printCafe, a newly agglomerated collection of acquired existing printing management information systems. With a hipster booth, all decked out in coffee brown and a clever steaming cup of coffee logo, the prime show location was mobbed. Some attendees, myself included, were trying to understand what it meant now that my printing company’s MIS system had been acquired by and was part of a dotcom darling. Did I really want this upstart coming between my company and our customers? Exactly who did they intend to serve, printers like me or our customers? I knew right away that the reverse auction feature did not sound good. 

Along the back wall was another dotcom startup promising to change the world of printing. They called themselves Noosh, a whimsical name with a correspondingly whimsical logo. At the time, it was not exactly clear what they intended their software to do for printers, or maybe do to printers. But it certainly was exciting. The dotcom craze was in full swing and every day a new company appeared ready disrupt another industry, from books to pet food (as we now know, the book thing worked out, the pet food thing did not). Printing was just next in line. It’s been two decades since the internet bubble burst in 2000, dotcom stocks crashed, high-flying companies evaporated overnight, and internet companies lost an aggregate 75% of their value in six months. 

PrintCafe missed the boat, planning to go public in March 2000, the same month that the warning flags went up that many of the dotcom companies were burning cash with no prospect of making a profit. Not to be dissuaded, and still burning cash, printCafe went public the next year, eventually earning the position as the second-worst initial public offering of 2002, losing 90% of its initial offering price. As it turned out, not much changed with the MIS systems. Progress came to a virtual halt with the MIS systems until eventually EFI acquired printCafe. EFI dropped the caffeine-inspired theme and began the difficult job of making sense out of the disparate members of the coffee clutch. 

Noosh somehow made it through and survived, morphing into a marketing execution and procurement system. The logo grew up, as did the business, recently reported to have in excess of $1.2 billion of spending coursing through the Noosh system on the way to printing and promotional suppliers. The audience for Noosh is now clear, large corporate enterprise marketing departments and advertising agencies are each offered a version to support their procurement of marketing materials and control costs. Printing companies need not apply. 

The Noosh website still promotes the dreaded reverse auction, a very unpopular (among printers), but common, feature of early internet-based print purchasing platforms, in which participating printers get the privilege of finding out which company will lower their price the most. 

HH Global, the UK-based print and marketing management company, announced the purchase of Noosh, touting that the combination of the companies “will allow both businesses to leverage greater aggregated spend under management.” The purchasing power of HH Global is not welcome at many printing companies when they find out that their formerly loyal customers have outsource the print buying decision to a global behemoth whose very existence is based on relentlessly squeezing down suppliers’ margins. The acquisition of Noosh comes a little more than a year after HH Global took out Innerworkings, its major competitor in the print management business (see Buyers are On The Move and On Track, Marketing Execution (Print Management) – July 2020). 

Much has changed since the dotcom boom and bust. Printing companies still have direct relationships with many of their customers. The promise of printCafe and Noosh did not play out as their founders thought and promised back in Chicago. However, as it turns out, a significant portion of the spend on printing and related marketing materials was disrupted and is now controlled by a global intermediary using internet-based technology. 

Commercial Printing

Allan Creel, formerly the owner of Creel Printing, is back in the game with the purchase of Fenske Media in Rapid City, South Dakota. Creel was an early devotee of on-demand digital printing technologies within the commercial printing segment, acquiring New Jersey-based GlobalSoft Digital Solutions back in 2015, a quantum-jump in distance and technology from the large offset printing facility the company had in Las Vegas. Creel Printing grew to six locations, $120 million in revenue, and approximately 700 employees, before selling out to LSC Communications in 2017. In another stop on a long and winding road, in 2020 Creel bought back his namesake company in a 363-asset sale from LSC Communications when LSC entered bankruptcy. That did not last long and select assets of the company were sold to national consolidator Mittera Group less than five months later and the Las Vegas operation was shut down. People in the printing industry often say the ink gets in your blood and no matter how hard you try the industry draws you back in. It seems that Allan Creel would agree. 

Packaging

Private equity firms continued their love affair with the packaging industry. Roll-ups are combined with other roll-ups and PE funds complete secondary and even tertiary buyouts from other funds (see Private Equity Fuel$ Consolidation of Label Industry – September 2021 and also Packaging Industry Consolidation in Every Direction – July 2021). 

Fortis Solutions Group, with backing for several years from Main Post Partners, was acquired in a secondary buyout funded by Harvest Partners. Four days before the announced switch of financial sponsors, Fortis itself acquired Quality Tape and Label, a manufacturer of labels and shrink sleeves in Marietta, Georgia. 

In another secondary buyout, Chicago-based private equity fund GTCR acquired PPC Flexible Packaging. PPC Flexible Packaging had built up a network of ten manufacturing facilities in the US and South America in just four years, backed with funding from Morgan Stanley Capital. 

C-P Flexible Packaging, a portfolio company of First Atlantic Capital, acquired Preferred Packaging, a producer of flexible packaging film in Norcross, Georgia. Rohrer, with financial backing by Wellspring Capital, announced the purchase of Coburn Carton Solutions, a manufacturer of folding cartons based in Hayesville, OH.

 
2021 October - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

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

Party #1 Address

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

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

Notes
Press
Release
Hybrid Software Group No Data Cambridge, UK ColorLogic No Data Rheine, Germany 10/28/21 No Data Acquisition Color profile software Link
Allan Creel No Data Las Vegas, NV Fenske Media No Data Rapid City, SD 10/26/21 No Data Acquisition
(New Direction)		 Commercial printing Link
C-P Flexible Packaging
(Port co. First Atlantic Capital)		 No Data York, PA Preferred Packaging No Data Norcross, GA 10/22/21 No Data Acquisition Flexible packaging films Link
Lowest Price Print No Data West Sacramento, CA Volume Press No Data West Sacramento, CA 10/21/21 No Data Acquisition Commercial printing Link
Dataflow No Data Binghamton, NY Quicker Printer No Data Elmira, NY 10/18/21 No Data Acquisition Printing & copying Link
Harvest Partners No Data New York, NY Fortis Solutions Group
(Port co. Main Post Partners)		 No Data Virginia Beach, VA 10/15/21 No Data Acquisition Labels & flexible packaging Link
Fortis Solutions Group
(Port co. Main Post Partners)		 No Data Virginia Beach, VA Quality Tape and Label No Data Marietta, GA 10/11/21 No Data Acquisition Labels & shrink sleeves Link
Dotdash
(Port co. IAC)		 $214.0 New York, NY Meredith $2,990 Des Moines, IA 10/6/21 $2,700 Acquisition Magazine publishing Link
Rohrer
(Port co. Wellspring Capital)		 No Data Wadsworth, OH Coburn Carton Solutions No Data Hayesville, OH 10/4/21 No Data Acquisition Folding cartons Link
BR Printers $21.6 San Jose, CA C.J. Krehbiel Co
dba CJK Print Possibilities		 $14.5 Cincinnati, OH 10/1/21 No Data Acquisition
(Anderson LeNeave)		 Book manufacturing Link
Champion Media No Data Mooresville, NC Herald-Advocate No Data Bennettsville, SC 10/1/21 No Data Acquisition Community newspaper Link
HH Global Group $426.5 Leatherhead, England Noosh $11.0 Mountain View, CA 10/1/21 No Data Acquisition Procurement management Link
CCL Industries $5,480 Toronto, ON D&F $31.3 San Luis, Mexico 10/1/21 $50.7 Acquisition Industrial printing Link
GTCR No Data Chicago, IL PPC Flexible Packaging
(Port co Morgan Stanley Capital)		 No Data Buffalo Grove, IL 10/1/21 No Data Acquisition Flexible packaging Link


2021 October - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party
Date
Case
Filed		 Pre-Petition
Revenues
(US$Mil)


Case #


Filing Party Address


Circuit


Region & City


Judge


Attorney for Debtor


Notes
Chapter 11 Filings:
Mid Atlantic Printers, LTD. 10/27/21 No Data 21-61173 Altavista, VA 4th Western VA
Lynchburg		 Rebecca B. Connelly Andrew S. Goldstein Commercial printing
Chapter 7 Filings:
Pocono Screen Supply, LLC 10/31/21 No Data 21-02229 Lackawanna, PA 3rd Middle PA
Wilkes-Barre		 Henry W. Van Eck Brian E. Mannin Screen printing supplies

  
2021 October - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility
Date of Closure		 Pre-Closure
Revenues
(US$Mil)


Closing Address		 Related Party Related Party
Address		 Date Closure Public


Notes
Press
Releases
Windmill Press 11/9/21 No Data Pennsauken, NJ None N/A Oct-21 Specialty printing & finishing Link
Brown Industries 12/16/21 No Data Dalton, GA None N/A Oct-21 Retail displays Link

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