Even his initials are M&A.
Fresh from rejecting several acquisition attempts by rival R.R. Donnelley, Quebecor World stunned the Donnelley folks this week by announcing a new chairman who knows a thing or two about mergers and acquisitions in the printing industry. And about Donnelley.
Mark A. Angelson, who retired from RRD two years ago after leading a massive acquisition drive that turned it into the world's largest printer, is to become the new Quebecor World chairman when the company emerges from bankruptcy protection and changes it name, reportedly to Novink. That is supposed to occur next month, though the U.S. government threw a fly into the ointment this week by objecting to QW's reorganization plan in bankruptcy court.
A lawyer by training, Angelson seems to live for the deal.
After bringing about the merger that created the Moore Wallace printing company, Angelson engineered the combination of Moore Wallace and Donnelley. Then in just four years as CEO at Donnelley, he led its acquisitions of Banta, Perry Judd's, and Von Hoffman, among others. His protege, Thomas Quinlan III, now heads Donnelley.
All of this leads to the obvious question: What is Quebecor World up to?
A hint came in this statement by a spokesman for Angelson and the other new QW directors: "The highly fragmented printing industry must undergo further consolidation, and this company will be an important part of that process. We look forward to providing overall strategic guidance, best governance practices and oversight."
That Donnelley-esque statement is a wake-up call for the Donnelley folks, who thought they were the ones to pursue the "strategic initiatives" to consolidate the North American printing industry. Those who crafted the proposal that Donnelley become QW's stalking-horse bidder were reportedly caught off guard by QW's responses, which amounted to "No," "No," and "Hell, no!"
Is Quebecor World audacious enough to think it can raise the capital to make a run at buying competitors? Or do the banks and other creditors who essentially own QW want an M&A guy who can get the maximum value from selling off or breaking up the company? Will Angelson remain a non-executive chairman, or will he end up running the company?
Let the games begin!
Sunday, June 28, 2009
Tuesday, June 23, 2009
Postal Service May Boost Ride-Alongs
The U.S. Postal Service is preparing some price breaks for the money-losing Periodicals class, sources tell Dead Tree Edition.
The most likely change to the Periodicals class, which is used by magazines and newspapers, seems to be a revamping of the “ride-along” pricing and regulations. Ride-alongs are items not eligible for Periodicals treatment on their own, such as product samples and catalogs, that are mailed along with a Periodicals publication.
Postal officials are likely to allow more than one ride-along per publication and to lower the prices for them, especially for ones weighing less than an ounce, sources say. Although USPS is losing money on the Periodicals class, attracting more ride-alongs would be profitable for the agency because including one in a publication hardly changes the Postal Service’s handling costs.
The rate was originally set at 10 cents per ride-along because of concerns that the Periodicals class would cannibalize the more profitable Standard class. Postal officials feared, for example, that cataloguers might just enclose items with magazines rather than mailing them separately.
The arcane formula that was established for setting the ride-along rate has caused it to rise much faster than the rate of inflation, to the current price of 16.5 cents per piece. That has kept annual volume low – fewer than 100 million pieces in the 12 months that ended in September 2008 and probably even lower this year.
It also turns out that the main interest in ride-alongs is for innovative advertisements and single-advertiser supplements, not for catalogs and other items cannibalized from Standard mail. Publishers cite advertising proposals involving seed-impregnated paper, shampoo samples, magnets, and Band-Aids as among those that have been nixed by the high cost of ride-alongs.
There has also been talk of special rates to help Periodicals publishers attract new subscribers, according to one source, but there are questions about whether to help grow a class on which USPS loses money. Some point out that Periodicals’ profitability problem is mostly a matter of fixed costs, and perhaps of a flawed USPS system for allocating costs, so additional newspapers and magazines are likely to be profitable for the Postal Service.
Since not many publishers are increasing their ratebases these days, it seems likely they would use a new-subscriber program not to grow their circulation but to displace non-mail sources of new subscribers. Some publishers tell Dead Tree Edition that they are planning to use this year’s Summer Sale on Standard Mail to obtain new subscribers who might normally come from subscription agents.
The most likely change to the Periodicals class, which is used by magazines and newspapers, seems to be a revamping of the “ride-along” pricing and regulations. Ride-alongs are items not eligible for Periodicals treatment on their own, such as product samples and catalogs, that are mailed along with a Periodicals publication.
Postal officials are likely to allow more than one ride-along per publication and to lower the prices for them, especially for ones weighing less than an ounce, sources say. Although USPS is losing money on the Periodicals class, attracting more ride-alongs would be profitable for the agency because including one in a publication hardly changes the Postal Service’s handling costs.
The rate was originally set at 10 cents per ride-along because of concerns that the Periodicals class would cannibalize the more profitable Standard class. Postal officials feared, for example, that cataloguers might just enclose items with magazines rather than mailing them separately.
The arcane formula that was established for setting the ride-along rate has caused it to rise much faster than the rate of inflation, to the current price of 16.5 cents per piece. That has kept annual volume low – fewer than 100 million pieces in the 12 months that ended in September 2008 and probably even lower this year.
It also turns out that the main interest in ride-alongs is for innovative advertisements and single-advertiser supplements, not for catalogs and other items cannibalized from Standard mail. Publishers cite advertising proposals involving seed-impregnated paper, shampoo samples, magnets, and Band-Aids as among those that have been nixed by the high cost of ride-alongs.
There has also been talk of special rates to help Periodicals publishers attract new subscribers, according to one source, but there are questions about whether to help grow a class on which USPS loses money. Some point out that Periodicals’ profitability problem is mostly a matter of fixed costs, and perhaps of a flawed USPS system for allocating costs, so additional newspapers and magazines are likely to be profitable for the Postal Service.
Since not many publishers are increasing their ratebases these days, it seems likely they would use a new-subscriber program not to grow their circulation but to displace non-mail sources of new subscribers. Some publishers tell Dead Tree Edition that they are planning to use this year’s Summer Sale on Standard Mail to obtain new subscribers who might normally come from subscription agents.
Saturday, June 20, 2009
Why U.S. Pulp Mills Are Like NBA Players
My friend the youth basketball coach cringes at mentions of the NBA because of the bad habits his players pick up from watching it.
After seeing their favorite pro player take a couple of steps before dribbling, the kids have trouble telling the difference between proper ball handling and a traveling violation. But my friend doesn't blame the NBA players.
As an environmentalist who makes a living from printed products (at my day job, not from this blog), I hate to see U.S. pulp manufacturers rake in billions of government dollars in black-liquor credits. They are accepting environmental-incentive money for doing something that does nothing for the environment, which could lead to public backlash against all paper-based products.
But I don't blame the pulp and paper companies.
It's the NBA's job to set the rules. It's the players' job to do what they can within those rules to help their team win. It's the refs' job to decide when the rules are broken.
It's the government's job to establish laws and regulations. It's a business's job to maximize its owners' return on investment while working within those laws and regulations. And it's the IRS' job to decide when a pulp mill qualifies for the black-liquor credits.
Forest-products companies are used to being on the wrong side of foolish government policies and pronouncements -- most recently California Governor Arnold Schwarzenegger's claim that digital textbooks are greener than printed ones. Can we blame them for taking advantage of a foolish government policy that for once is in their favor?
Can we, for example, criticize Domtar for its decision last week to accept the credits, which enabled it to reopen its pulp mill in Baileyville, Maine and put 300 people back to work? Can we blame the manufacturers if government policy now gives them an incentive to displace recycled pulp and mechanical pulp with kraft pulp?
Self-righteous Congressmen criticizing pulp and paper companies for accepting black-liquor credits is as hypocritical as NBA officials complaining about the sloppy dribbling of pro basketball players. If you’re in charge of making the rules, don’t complain about people who follow your crummy rules; change the rules.
After seeing their favorite pro player take a couple of steps before dribbling, the kids have trouble telling the difference between proper ball handling and a traveling violation. But my friend doesn't blame the NBA players.
As an environmentalist who makes a living from printed products (at my day job, not from this blog), I hate to see U.S. pulp manufacturers rake in billions of government dollars in black-liquor credits. They are accepting environmental-incentive money for doing something that does nothing for the environment, which could lead to public backlash against all paper-based products.
But I don't blame the pulp and paper companies.
It's the NBA's job to set the rules. It's the players' job to do what they can within those rules to help their team win. It's the refs' job to decide when the rules are broken.
It's the government's job to establish laws and regulations. It's a business's job to maximize its owners' return on investment while working within those laws and regulations. And it's the IRS' job to decide when a pulp mill qualifies for the black-liquor credits.
Forest-products companies are used to being on the wrong side of foolish government policies and pronouncements -- most recently California Governor Arnold Schwarzenegger's claim that digital textbooks are greener than printed ones. Can we blame them for taking advantage of a foolish government policy that for once is in their favor?
Can we, for example, criticize Domtar for its decision last week to accept the credits, which enabled it to reopen its pulp mill in Baileyville, Maine and put 300 people back to work? Can we blame the manufacturers if government policy now gives them an incentive to displace recycled pulp and mechanical pulp with kraft pulp?
Self-righteous Congressmen criticizing pulp and paper companies for accepting black-liquor credits is as hypocritical as NBA officials complaining about the sloppy dribbling of pro basketball players. If you’re in charge of making the rules, don’t complain about people who follow your crummy rules; change the rules.
American forest-products executives do need to understand one thing: Don’t expect any sympathy from Congress, or your customers, the next time you come around whining about how the Chinese, or the Canadians, or the Finns are subsidizing their mills and dumping their product in the
Thursday, June 18, 2009
Second Guessing on Quebecor-Donnelley
A creditor and a stock analyst are second-guessing Quebecor World’s decision to spurn R.R. Donnelley's acqusition attempts.
Quebecor World cannot show that it “fully cooperated with RRD and adequately considered the RRD offer in light of the best interests of the Debtors’ estates, rather than entrenched management’s best interests,” disgruntled creditor Riverside LLC stated in its motion to derail QW’s proposed bankruptcy-reorganization plan. Riverside, which bought unsecured claims against the big printing company from various creditors, also argued to a U.S. bankruptcy court that the plan improperly discriminates against holders of multiple claims.
A stock analyst who follows RRD predicted QW would face “a tough stretch” when it emerges from bankruptcy, scheduled for mid-July. Down the road, it may end up wishing it had accepted RRD’s offer last week to buy it, Charles Strauzer of CJS Securities told the The Canadian Press yesterday.
QW’s balance sheet will be stronger than when it filed for bankruptcy protection, but its ambitious goals will run smack into the reality of a difficult economy, the analyst said.
The court-appointed bankruptcy monitor in Canada, however, has endorsed the reorganization plan, on which creditor voting is scheduled to conclude on Monday. Ernst & Young told the court last week that the most recent Donnelley's offer "has some merit, but carries significant execution risks."
One risk to the merged company would be “a loss of customers seeking to diversify the supply chain,” the latest monitor’s report said. Indeed, some folks who do most of their printing with RRD and QW have told Dead Tree Edition they would try to move some business elsewhere so that the merged company would not have too much leverage over them.
Ernst & Young also noted that achieving regulatory approval might require that parts of QW be sold off, with unknown cost.
QW and RRD held "numerous meetings and discussions" during the four-week courtship, including an all-day meeting May 29 in Washington, DC, Ernst & Young reported. It described the discussions as "cordial and open.
QW insiders say the company's new name is to be revealed on Monday, presumably in conjunction with the reorganization plan being approved. Some media outlets have reported that the new name will be "Novink", but the insiders will only say that the name begins with "N" and has six letters.
One correspondent pointed out another name fitting that description: "NotRRD".
Quebecor World cannot show that it “fully cooperated with RRD and adequately considered the RRD offer in light of the best interests of the Debtors’ estates, rather than entrenched management’s best interests,” disgruntled creditor Riverside LLC stated in its motion to derail QW’s proposed bankruptcy-reorganization plan. Riverside, which bought unsecured claims against the big printing company from various creditors, also argued to a U.S. bankruptcy court that the plan improperly discriminates against holders of multiple claims.
A stock analyst who follows RRD predicted QW would face “a tough stretch” when it emerges from bankruptcy, scheduled for mid-July. Down the road, it may end up wishing it had accepted RRD’s offer last week to buy it, Charles Strauzer of CJS Securities told the The Canadian Press yesterday.
QW’s balance sheet will be stronger than when it filed for bankruptcy protection, but its ambitious goals will run smack into the reality of a difficult economy, the analyst said.
The court-appointed bankruptcy monitor in Canada, however, has endorsed the reorganization plan, on which creditor voting is scheduled to conclude on Monday. Ernst & Young told the court last week that the most recent Donnelley's offer "has some merit, but carries significant execution risks."
One risk to the merged company would be “a loss of customers seeking to diversify the supply chain,” the latest monitor’s report said. Indeed, some folks who do most of their printing with RRD and QW have told Dead Tree Edition they would try to move some business elsewhere so that the merged company would not have too much leverage over them.
Ernst & Young also noted that achieving regulatory approval might require that parts of QW be sold off, with unknown cost.
QW and RRD held "numerous meetings and discussions" during the four-week courtship, including an all-day meeting May 29 in Washington, DC, Ernst & Young reported. It described the discussions as "cordial and open.
QW insiders say the company's new name is to be revealed on Monday, presumably in conjunction with the reorganization plan being approved. Some media outlets have reported that the new name will be "Novink", but the insiders will only say that the name begins with "N" and has six letters.
One correspondent pointed out another name fitting that description: "NotRRD".
Tuesday, June 16, 2009
Why General Motors Is Like the Postal Service
No one should have been surprised that members of Congress are stymieing General Motors' cost-cutting efforts to close thousands of dealerships. All they had to do was watch how Congress has micro-managed the supposedly independent U.S. Postal Service.
The Government Accountability Office, an arm of Congress, has been saying for years that USPS has too many post offices and too many processing and distribution centers. (See, for example, "Why USPS Must Consolidate Its Mail Processing Network".)
But any time the money-losing Postal Service actually tries to consolidate facilities, the local Congressman stirs up a hornet's nest, demanding an investigation and trying various tactics to slow the process. When USPS revealed recently that it is studying possible closure of more than 3,000 post offices nationwide, Rep. Albio Sires of New Jersey launched a preemptive strike, introducing the Access to Postal Services Act to "give communities the ability to fight back against these closings."
Now General Motors, AKA Government Motors, is getting the Postal Service Treatment: A bill to "restore the economic rights" of GM dealers got 111 co-sponsors within a week of being introduced. Like Chrysler before it, GM leaders have been grilled at Congressional hearings regarding their plans to consolidate their dealership network.
President Obama has said the federal government will not manage GM despite its majority ownership stake. But he also vetoed the possibility of it moving its headquarters out of Detroit to save money. Influential Congressman Barney Frank got into the We're Not Managing GM Spirit when he called the company's CEO and persuaded him to delay the closing of a parts depot in Frank's district.
Postal officials learned long ago that you move jobs into, not out of, the districts or states of committee chairmen.It's a lesson they haven't completely un-learned now that Congress has allegedly made the Postal Service more independent. (See "USPS: Clean Up the Byrd Droppings!")
Postal officials learned long ago that you move jobs into, not out of, the districts or states of committee chairmen.It's a lesson they haven't completely un-learned now that Congress has allegedly made the Postal Service more independent. (See "USPS: Clean Up the Byrd Droppings!")
The typical member of Congress doesn't oppose the idea of postal consolidation or car-dealer consolidation in general -- as long as it's not in his district. Unfortunately, believe it or not, every USPS facility and every GM dealership in the U.S. is in some Congress member's district.
Don't be surprised to see a Congressional investigation, rally, or public hearing for every dealership GM tries to close. And don't be surprised to see those former watchdogs known as local newspaper reporters become lapdogs for the Chamber of Commerce, quoting all the people who oppose the closings but never bothering to explore why GM needs to get rid of underperforming dealerships.
Just one question: Now that Congress is treating GM like the Postal Service, does that mean the Postal Service can cancel its debt by filing for Chapter 11?
Don't be surprised to see a Congressional investigation, rally, or public hearing for every dealership GM tries to close. And don't be surprised to see those former watchdogs known as local newspaper reporters become lapdogs for the Chamber of Commerce, quoting all the people who oppose the closings but never bothering to explore why GM needs to get rid of underperforming dealerships.
Just one question: Now that Congress is treating GM like the Postal Service, does that mean the Postal Service can cancel its debt by filing for Chapter 11?
Monday, June 15, 2009
Phone-Sex Service Gets Boost from Lands' End, International Paper
Here's one for the No Good Deed Goes Unpunished Department: Lands' End and International Paper are among the companies whose names have recently been connected to a telephone-sex outfit offering hundreds of "hot, horny girls . . . who love nasty talk."
The accompanying scan shows an example of the inadvertent promotion of the "Intimate Encounters" operation: It's from a panel of a box that was manufactured by International Paper and used to deliver Lithonia Lighting products to a construction site several months ago. The box includes the message "Corrugated Recycles", with a toll-free phone number to call for more information.
The American corrugated industry, however, phased out (800) 879-9777 at the end of 2007. Callers now are greeted with a recorded come-on that begins, "Hey there, sexy guy", as explained in "Hey, big boy, can I recycled your cardboard?"
It's taken awhile for the word to get out about the phase-out; some recycling information Web sites still list the number. And even companies that stopped ordering boxes with the phone number didn't throw away their existing boxes or pull the boxes off of dealers' shelves.
One Dead Tree Edition correspondent got a box displaying the 800 number from Lands' End last Christmas. He says the Sears subsidiary responded quickly to his email about the situation. Lands End apologized, said it was "shocked" to learn that the phone number had been changed, and offered a coupon, he reports.
One advantage of corrugated boxes is their durability. No doubt there are thousands of "porno cardboard" boxes in homes across the U.S. containing everything from Christmas ornaments to tax records to children's toys.
And one of the strengths of print is its durability. It doesn't disappear when a server goes down or a hard drive crashes.
Moral of the story: Printing a message on a corrugated box is great if you want the message to be around for a decade -- and not so great if you want to change the message after a year.
Disclosures: Although I've written several articles about "cardboard porn", I don't really get it. I'm not a pedophile, so the idea of talking nasty with "girls" seems creepy; I prefer women. Come to think of it, "telephone sex" sounds like an unnatural act. Then again, I don't know much about pornography. I don't even own a pornograph.
The accompanying scan shows an example of the inadvertent promotion of the "Intimate Encounters" operation: It's from a panel of a box that was manufactured by International Paper and used to deliver Lithonia Lighting products to a construction site several months ago. The box includes the message "Corrugated Recycles", with a toll-free phone number to call for more information.
The American corrugated industry, however, phased out (800) 879-9777 at the end of 2007. Callers now are greeted with a recorded come-on that begins, "Hey there, sexy guy", as explained in "Hey, big boy, can I recycled your cardboard?"
It's taken awhile for the word to get out about the phase-out; some recycling information Web sites still list the number. And even companies that stopped ordering boxes with the phone number didn't throw away their existing boxes or pull the boxes off of dealers' shelves.
One Dead Tree Edition correspondent got a box displaying the 800 number from Lands' End last Christmas. He says the Sears subsidiary responded quickly to his email about the situation. Lands End apologized, said it was "shocked" to learn that the phone number had been changed, and offered a coupon, he reports.
One advantage of corrugated boxes is their durability. No doubt there are thousands of "porno cardboard" boxes in homes across the U.S. containing everything from Christmas ornaments to tax records to children's toys.
And one of the strengths of print is its durability. It doesn't disappear when a server goes down or a hard drive crashes.
Moral of the story: Printing a message on a corrugated box is great if you want the message to be around for a decade -- and not so great if you want to change the message after a year.
Disclosures: Although I've written several articles about "cardboard porn", I don't really get it. I'm not a pedophile, so the idea of talking nasty with "girls" seems creepy; I prefer women. Come to think of it, "telephone sex" sounds like an unnatural act. Then again, I don't know much about pornography. I don't even own a pornograph.
Thursday, June 11, 2009
An Amazon Approach to Selling Magazine Subscriptions
What if the magazine industry followed Amazon’s example of marketing products to people based on their purchase history?
A correspondent forwarded this recent email from Amazon: “As someone who has purchased or rated A Child's Celebration of Folk Music, you might like to know that Save 26% at Amazon.com on Music from the Original Soundtrack and More: Woodstock is now available.” He says he purchased the folk music CD about six years ago.
I get it. Idealistic kids who were singing “We Shall Overcome” along with Pete Seeger in the early Sixties took about six years to graduate to snarling “Up against the wall, m**therf**ker” with the Jefferson Airplane. So I guess Amazon figures that 21st Century kids who enjoyed Woody Guthrie doing a silly song about cars six years ago (“Take you for a ride in my car, car”) are now ready to hear son Arlo recount his drug-smuggling exploits. (“Comin’ in to Los Angeleez, bringin’ in a couple o’ keys, Don’t touch my bags if you please, Mr. Customs Ma-a-an.”)
If the audience-development types (formerly known as magazine circulators before they allegedly became Web savvy) get hold of this idea, just think of the possible emails:
A correspondent forwarded this recent email from Amazon: “As someone who has purchased or rated A Child's Celebration of Folk Music, you might like to know that Save 26% at Amazon.com on Music from the Original Soundtrack and More: Woodstock is now available.” He says he purchased the folk music CD about six years ago.
I get it. Idealistic kids who were singing “We Shall Overcome” along with Pete Seeger in the early Sixties took about six years to graduate to snarling “Up against the wall, m**therf**ker” with the Jefferson Airplane. So I guess Amazon figures that 21st Century kids who enjoyed Woody Guthrie doing a silly song about cars six years ago (“Take you for a ride in my car, car”) are now ready to hear son Arlo recount his drug-smuggling exploits. (“Comin’ in to Los Angeleez, bringin’ in a couple o’ keys, Don’t touch my bags if you please, Mr. Customs Ma-a-an.”)
If the audience-development types (formerly known as magazine circulators before they allegedly became Web savvy) get hold of this idea, just think of the possible emails:
- "We see that you have allowed your subscription to Christianity Today to lapse. Perhaps you would like to make your backsliding complete with this special introductory offer to Playboy magazine.”
- “As someone who has allowed his Playboy subscription to expire after 20 years, we thought you might like to know that we’re offering a discounted subscription to Modern Maturity magazine, which comes with a $10 coupon good on your next purchase of Viagra.”
- “As a schlemiel who subscribed to all three incarnations of Radar, you might be interested in these special offers for magazines that are destined to shut down before your subscription runs out.”
- “We have found that people like you who bought the Stephen Colbert issue of Newsweek are also enjoying the special edition of Mad magazine that was written by the staff of The Atlantic Monthly.”
- “As a stockholder of a newspaper or newsprint company, we’d like to introduce you to the hot new magazine, Bankruptcy Today.”
- “As someone who’s been reading Nickelodeon magazine for the past four years, we thought you’d want to know that you are about to enter a stage of life that has, like, been abandoned by the U.S. magazine industry. Don't like it? Go txt yr frenz.”
Wednesday, June 10, 2009
Donnelley Takes Its Ball and Goes Home
R.R. Donnelley announced late today that it is giving up, for now anyway, on its efforts to buy rival printer Quebecor World.
RRD's third offer in less than a month to buy QW expired, RRD announced today, even though the proposal was "undoubtedly" better for creditors than QW's plan to emerge from bankruptcy next month, a company-issued statement said. RRD made the third offer on Monday; QW's board rejected it the same day.
"This would have been an excellent fit for RR Donnelley and the best opportunity for the Quebecor World creditors. However, given our view of the Quebecor World operations, a transaction ascribing a higher value to Quebecor World than we offered in our last proposal is simply not in the interests of RR Donnelley,” RRD's president and CEO, Thomas J. Quinlan III, said in the statement.
And here is Quinlan's kicker: “We look forward to continuing to pursue other strategic initiatives."
What other "strategic initiatives" does he have in mind? Since part of Donnelley's stated interest in QW was entry into the Canadian market, will it go after the other big Canada-based printer, Transcontinental Inc.? Or how about a sizable U.S. rival, such as Cenveo or Vertis? Or what about a post-bankruptcy Quebecor World?
Or maybe "strategic initiatives" just means "ways to remain profitable while round-heeled competitors keep dropping prices to get their idle presses running again."
RRD's third offer in less than a month to buy QW expired, RRD announced today, even though the proposal was "undoubtedly" better for creditors than QW's plan to emerge from bankruptcy next month, a company-issued statement said. RRD made the third offer on Monday; QW's board rejected it the same day.
"This would have been an excellent fit for RR Donnelley and the best opportunity for the Quebecor World creditors. However, given our view of the Quebecor World operations, a transaction ascribing a higher value to Quebecor World than we offered in our last proposal is simply not in the interests of RR Donnelley,” RRD's president and CEO, Thomas J. Quinlan III, said in the statement.
And here is Quinlan's kicker: “We look forward to continuing to pursue other strategic initiatives."
What other "strategic initiatives" does he have in mind? Since part of Donnelley's stated interest in QW was entry into the Canadian market, will it go after the other big Canada-based printer, Transcontinental Inc.? Or how about a sizable U.S. rival, such as Cenveo or Vertis? Or what about a post-bankruptcy Quebecor World?
Or maybe "strategic initiatives" just means "ways to remain profitable while round-heeled competitors keep dropping prices to get their idle presses running again."
Tuesday, June 9, 2009
After 3 Swings at Quebecor, Has Donnelley Struck Out?
R.R. Donnelley wanted a quick answer to its third attempt to acquire Quebecor World. It got one.
QW revealed today that its board didn’t even wait for the sun to set on yesterday’s sweetened offer from its printing rival. The board decided that its plan to emerge from bankruptcy protection this summer is still better than what RRD is offering.
The reorganization plan “presents fewer risks to completion than would the transactions proposed by RRD,” QW stated in a document filed with U.S. and Canadian bankruptcy courts.
In theory, QW’s creditors could overrule the board and try to bring Donnelley back to the table. But representatives of the creditors turned down RRD’s second offer last Friday (June 5), the document revealed, so they apparently share the board’s view that pursuing a deal with Donnelley would not be worth the risk, even at a premium price.
In theory, RRD could come back with yet another offer. But its letter yesterday said its third try was its “highest and best offer”.
QW issued a statement today saying,"Quebecor World is proceeding on the timetable contemplated under its proposed reorganization plans so as to successfully emerge from both the U.S. and Canadian insolvency proceedings by mid-July 2009. In that connection, the Company is pleased to announce that it is well advanced in its exit financing process.”
QW would emerge from bankruptcy with a new name – not yet revealed – and perhaps a smaller footprint. Some observers think its Chapter 11 status has prevented it from shutting unprofitable plants to cope with dwindling demand for print.
It’s not clear whether RRD would be as interested in purchasing QW after the bankruptcy reorganization is complete.
QW revealed today that its board didn’t even wait for the sun to set on yesterday’s sweetened offer from its printing rival. The board decided that its plan to emerge from bankruptcy protection this summer is still better than what RRD is offering.
The reorganization plan “presents fewer risks to completion than would the transactions proposed by RRD,” QW stated in a document filed with U.S. and Canadian bankruptcy courts.
In theory, QW’s creditors could overrule the board and try to bring Donnelley back to the table. But representatives of the creditors turned down RRD’s second offer last Friday (June 5), the document revealed, so they apparently share the board’s view that pursuing a deal with Donnelley would not be worth the risk, even at a premium price.
In theory, RRD could come back with yet another offer. But its letter yesterday said its third try was its “highest and best offer”.
QW issued a statement today saying,"Quebecor World is proceeding on the timetable contemplated under its proposed reorganization plans so as to successfully emerge from both the U.S. and Canadian insolvency proceedings by mid-July 2009. In that connection, the Company is pleased to announce that it is well advanced in its exit financing process.”
QW would emerge from bankruptcy with a new name – not yet revealed – and perhaps a smaller footprint. Some observers think its Chapter 11 status has prevented it from shutting unprofitable plants to cope with dwindling demand for print.
It’s not clear whether RRD would be as interested in purchasing QW after the bankruptcy reorganization is complete.
Monday, June 8, 2009
Donnelley Makes Another Pass at Quebecor World
Please see the June 9 update, "After 3 Swings at Quebecor, Has Donnelley Struck Out?
Printing giant R.R. Donnelley sweetened the pot today in making another offer for rival Quebecor World.Donnelley will kick in another $100 million in cash and help pay for QW’s financing costs until the deal is closed, it said in a letter to QW that it also filed with the U.S. Securities and Exchange Commission. The letter revealed that the two companies have been in discussions since RRD made its first offer for QW on May 12. It said that RRD had already agreed last week to assume some of QW’s pension liabilities and to structure the deal to avoid tax liabilities for QW. “If you are interested in continuing to pursue this transaction, we ask that you let me know by the close of business on Wednesday, June 10th,” today’s letter states. RRD is apparently eager to head off or alter a scheduled vote next week by QW’s creditors on a plan to have QW emerge from bankruptcy protection as an independent company. QW has expressed concern that if that vote failed or were delayed, the company could have trouble continuing to operate after its debtor-in-possession financing runs out on July 21. RRD offered today to cover 50% of the costs of extending that financing – or 100% if it is not able to complete the acquisition.
“There would be no financing condition to the Acquisition,” today’s letter says. “We have sufficient funds to pay the cash portion of the consideration from cash on hand and/or availability under our existing revolving credit facility.”
RRD is still proposing that it be QW’s “stalking horse”, which means QW creditors could seek a better offer.
Printing giant R.R. Donnelley sweetened the pot today in making another offer for rival Quebecor World.Donnelley will kick in another $100 million in cash and help pay for QW’s financing costs until the deal is closed, it said in a letter to QW that it also filed with the U.S. Securities and Exchange Commission. The letter revealed that the two companies have been in discussions since RRD made its first offer for QW on May 12. It said that RRD had already agreed last week to assume some of QW’s pension liabilities and to structure the deal to avoid tax liabilities for QW. “If you are interested in continuing to pursue this transaction, we ask that you let me know by the close of business on Wednesday, June 10th,” today’s letter states. RRD is apparently eager to head off or alter a scheduled vote next week by QW’s creditors on a plan to have QW emerge from bankruptcy protection as an independent company. QW has expressed concern that if that vote failed or were delayed, the company could have trouble continuing to operate after its debtor-in-possession financing runs out on July 21. RRD offered today to cover 50% of the costs of extending that financing – or 100% if it is not able to complete the acquisition.
“There would be no financing condition to the Acquisition,” today’s letter says. “We have sufficient funds to pay the cash portion of the consideration from cash on hand and/or availability under our existing revolving credit facility.”
RRD is still proposing that it be QW’s “stalking horse”, which means QW creditors could seek a better offer.
Saturday, June 6, 2009
Time May Not Be on Donnelley's Side
As rumors swirled the past couple of days that Quebecor World's creditors committee had rejected R. R. Donnelley's acquisitive advances, it became clear that Donnelley's plan may have a fatal flaw.
Folio:'s web site published a piece late Friday (June 5) pointing out several problems with Donnelley's proposal, mainly that working out formal terms, getting approval from antitrust authorities, and consummating the deal would take many months. Meanwhile, QW's special debtor-in-possession financing would run out on July 21, and the creditors would be waiting for their money.
Sources inside and outside QW have passed along the rumor that QW's creditors committee, which is in the driver's seat, had turned down RRD. But the committee's only publicly stated position is a May 15 letter to creditors recommending a vote for the QW reorganization plan that states, "If it appears that this [Donnelley's] proposal will provide recoveries to the Debtors' unsecured creditors that are greater and/or better than those provided under the proposed Plan, the Creditors' Committee will take all necessary steps to pursue such proposal and the Creditors' Committee's recommendation may change."
The letter does not state whether the committee took what RRD recommended in its May 12 proposal as the next step -- "immediately identify a working group at the Quebecor Debtors that can work with us . . . to conduct the due diligence process and finalize the terms of the definitive asset purchase agreement." RRD's letter indicated that it could not present a formal proposal until such a process occurred.
What is not clear is whether Donnelley would still be interested in an acquisition after QW emerges from bankruptcy protection. Stay tuned.
Folio:'s web site published a piece late Friday (June 5) pointing out several problems with Donnelley's proposal, mainly that working out formal terms, getting approval from antitrust authorities, and consummating the deal would take many months. Meanwhile, QW's special debtor-in-possession financing would run out on July 21, and the creditors would be waiting for their money.
Sources inside and outside QW have passed along the rumor that QW's creditors committee, which is in the driver's seat, had turned down RRD. But the committee's only publicly stated position is a May 15 letter to creditors recommending a vote for the QW reorganization plan that states, "If it appears that this [Donnelley's] proposal will provide recoveries to the Debtors' unsecured creditors that are greater and/or better than those provided under the proposed Plan, the Creditors' Committee will take all necessary steps to pursue such proposal and the Creditors' Committee's recommendation may change."
The letter does not state whether the committee took what RRD recommended in its May 12 proposal as the next step -- "immediately identify a working group at the Quebecor Debtors that can work with us . . . to conduct the due diligence process and finalize the terms of the definitive asset purchase agreement." RRD's letter indicated that it could not present a formal proposal until such a process occurred.
What is not clear is whether Donnelley would still be interested in an acquisition after QW emerges from bankruptcy protection. Stay tuned.
Friday, June 5, 2009
Combining Roto and Web Offset on the Same Product
By Jack Graber
Part 3 of a 3-part series. (See part 1, "Rotogravure: A Missed -- and Misunderstood -- Opportunity for Publishers" and part 2, "Advantages of Rotogravure vs. Web Offset".)
For many publishers, the answer is not heatset web offset or rotogravure but rather a combination of the two. They may print the bulk of the body pages rotogravure but use offset for covers and for press forms with small page counts or different versions.
So the answer of when to use gravure is going to be based on several factors:
The size of your publication
The number of pages
The quantity to be printed
The number of versions
The paper type
All of these factors must be considered before making your final selection. Many people are under the mistaken impression that you must have a large number of pages to use rotogravure. Yet a 16-page catalog with 6 million copies may be an ideal candidate for rotogravure, whereas a 64 page book for 500,000 may require a closer analysis.
As a general rule, it is the number of impressions that are the important factor. If the page counts are too small and the impressions after filling the press running 4 or 5 up are too small, then rotogravure would not be economically viable. On the other hand, if the page counts are larger, then printing a gravure form is definitely something that should be examined.
Recent advances in the digital engravers (pictured above) that make the rotogravure cylinders have increased speed and accuracy and have somewhat reduced the breakeven quantity needed to look at the gravure process. With today’s technology, you can definitely go below the one-million impression count that used to be inviolable in the
So analyze the factors described, establish a solid partnership with your print supplier and consider mixing a rotogravure printed form with your offset covers for maximum flexibility, quality, and cost savings. At the end of the day, the right understanding and analysis – not your publication’s size -- will determine whether you can benefit from gravure.
Thursday, June 4, 2009
Advantages of Rotogravure vs. Web Offset
By Jack Graber
2nd in a 3-part series
(See Part 1, "Rotogravure: A Missed -- and Misunderstood -- Opportunity for Publishers".)
Rotogravure has a variety of advantages over heatset web offset (HSWO), which is the usual method for printing magazines and catalogs:
2nd in a 3-part series
(See Part 1, "Rotogravure: A Missed -- and Misunderstood -- Opportunity for Publishers".)
Rotogravure has a variety of advantages over heatset web offset (HSWO), which is the usual method for printing magazines and catalogs:
- Lower running (per M) costs, especially when filling the entire press.
- Having no intermediate blanket, ink-water balance problems, or printing of wet ink on wet ink, rotogravure can lay down a greater proportion of ink with more consistency than HSWO. That leads to superior detail and depth of color even on the lightest of papers, which means publishers can reduce their paper and postage costs without sacrificing quality
- Rotogravure is better suited to lightweight uncoated papers. When HSWO printers use lightweight supercalendered papers, the low surface strength often leads to slower press speeds, linting, and high ink usage. Not so with roto. Rotogravure printing on a good SCA can actually achieve print quality equal to that of HSWO on a more expensive lightweight coated #5 paper.
- The variable cutoff leads to less trim waste because you can tailor the cylinder size and web width. HSWO presses have a fixed cutoff.
- The ability to print large signatures, such as 96-page forms, enables some publishers to save on bindery costs by using fewer hoppers.
- The ability to print large numbers of pages on one press also can reduce cycle time.
Summer Sale Approved With Flying Colors
The Postal Regulatory Commission approved the U.S. Postal Service's "Summer Sale" today and predicted it will be profitable for the agency.
"The Postal Service is to be commended for its response to current market conditions," the PRC said in its order. It is, however, requiring USPS to report results of the sale in detail, including information regarding whether it causes customers to shift mail from First Class to Standard class.
"Development and use of appropriate metrics in evaluating the program are critical in determining whether the program is successful, and also for assessing the long-term implications of such an approach," the PRC wrote in approving the "short-term pricing experiment."
Based on the Postal Service's projections and its own analysis, "the Commission concludes that a positive contribution from the program is likely."
Formal comments filed with the PRC about the proposal were overwhelmingly supportive, with expected opposition from rural letter carriers never materializing. In addition to the formal documents, the PRC said it had "received nearly 300 letters, expressing nearly unanimous support for the program."
The Summer Sale will provide rebates of 30% on incremental Standard flats and letters sent by large mailers during the months of July, August, and September this year. The Postal Service has indicated that it might repeat this sort of incentive to boost volume during generally slow periods.
"The Postal Service is to be commended for its response to current market conditions," the PRC said in its order. It is, however, requiring USPS to report results of the sale in detail, including information regarding whether it causes customers to shift mail from First Class to Standard class.
"Development and use of appropriate metrics in evaluating the program are critical in determining whether the program is successful, and also for assessing the long-term implications of such an approach," the PRC wrote in approving the "short-term pricing experiment."
Based on the Postal Service's projections and its own analysis, "the Commission concludes that a positive contribution from the program is likely."
Formal comments filed with the PRC about the proposal were overwhelmingly supportive, with expected opposition from rural letter carriers never materializing. In addition to the formal documents, the PRC said it had "received nearly 300 letters, expressing nearly unanimous support for the program."
The Summer Sale will provide rebates of 30% on incremental Standard flats and letters sent by large mailers during the months of July, August, and September this year. The Postal Service has indicated that it might repeat this sort of incentive to boost volume during generally slow periods.
Wednesday, June 3, 2009
Rotogravure: A Missed -- and Misunderstood -- Opportunity for Publishers
By Jack Graber
(Dead Tree Edition is pleased to welcome guest author Jack Graber, a member of Production Executive's Hall of Fame and most recently Director of Production and Corporate Paper for Redcats, a leading multi-catalog company. Although he's a catalog guy, even magazine people recognize him as the best in the business when it comes to figuring out whether rotogravure or offset, or both, are best for a particular print job. You can reach Jack at jlg500@aol.com. This is the first of a three-part series.)
Many publishers are overlooking a great opportunity to save money and improve print quality on the current crop of lightweight papers. That opportunity is rotogravure, one of the most misunderstood of the major printing processes.
(Dead Tree Edition is pleased to welcome guest author Jack Graber, a member of Production Executive's Hall of Fame and most recently Director of Production and Corporate Paper for Redcats, a leading multi-catalog company. Although he's a catalog guy, even magazine people recognize him as the best in the business when it comes to figuring out whether rotogravure or offset, or both, are best for a particular print job. You can reach Jack at jlg500@aol.com. This is the first of a three-part series.)
Many publishers are overlooking a great opportunity to save money and improve print quality on the current crop of lightweight papers. That opportunity is rotogravure, one of the most misunderstood of the major printing processes.
Roto competes head to head with the more popular web-offset process for the production of high-volume catalogs and magazines. But previous rules of thumb about roto have misled many people, especially in
The popular rule of thumb is that it takes a print order of 1 million for roto to break even with offset, but in many cases it may make sense for much smaller press runs.
To understand the advantages of the process, we must first grasp the basics of rotogravure production. It’s an intaglio process, which means the image area is separated from the non image areas by being engraved below the surface – in this case into a smooth copper cylinder. Digital data for text and images feeds a machine known as a Helioklischograph, which does the engraving with diamond heads. The entire cylinder rotates in a bath of ink. As the cylinder turns, the excess ink is wiped off by a flexible steel doctor blade.
The paper is printed directly as it passes between the printing cylinder and the impression cylinder, with the impression cylinder containing an electric charge that causes the ink to be removed completely from the engraved cells.
The publication gravure press has the web going through the first four units, where only one side of the paper is printed at a time. Each color is dry before the next color is printed. The paper then travels up to be turned over and to have the second side printed. (In contrast, web offset prints both sides at the same time and does not dry one color completely before another is applied.)
The web of paper then goes through two folders – an upper folder to slit the larger web into what are known as ribbons and the lower folder to make the final signatures.
One advantage of gravure is the many options for sizes and page counts because both the cylinder circumference (or cutoff) and the web width can vary. For some of the high page-count magazine and catalog formats, you can print as many as 144 publication-size pages on the same press.
It costs more to start up a rotogravure press than an offset press, and it takes somewhat longer to make cylinders than offset plates. However the greater press capacity allows for less overall production time and the printing of less total forms for the bindery.
Next: Part 2, "Advantages of Rotogravure vs. Web Offset"
Tuesday, June 2, 2009
Q&A on the Donnelley-Quebecor World Deal
For the latest on Donnelley's effort to buy Quebecor World, see "After 3 Swings at Quebecor, Has Donnelley Struck Out?"
R.R. Donnelley’s proposal to take over Quebecor World has been the talk lately of almost everyone involved in producing real books, magazines, and catalogs. (By “real” I mean ink-on-paper publications, as opposed to the kind that can only be read on petrochemical-containing, electricity-burning devices. You know, “dead tree editions”, as opposed to “dead dinosaur editions.”)
There’s been a lot of misunderstanding about what is going on, including some notable goofs by the mainstream media. To clear up the confusion, Dead Tree Edition (with the help of some anonymous correspondents) offers this Q&A guide:
Q: The big question: Can the deal win government approval? A: Adam Dewitz of PrintCeo says, "I don't see anything stopping this deal from going through," and Frank Romano chips in with a video commentary at the same site noting there are thousands of printers in the U.S. The problem with that view is that there is not one printing market but many; small sheetfed shops are irrelevant to the RRD-QW discussions. Some major print-buying organizations are already planning anti-trust challenges to RRD's proposal. Although Donnelley will probably end up buying QW, it seems likely that some plants will have to be divested -- especially in markets like rotogravure printing that are already oligopolies. (Because rotogravure printing is such an important part of the discussion and yet not widely understood, Dead Tree Edition has invited industry expert Jack Graber to explain the ins and outs of rotogravure from a buyer’s perspective and how it can be used in conjunction with offset. Look for Jack’s three-part series starting tomorrow.)
Q: Is it a good deal for Quebecor? A: First of all, we have to define what is meant by “Quebecor”. If you mean the stockholders of Quebecor World, the proposal would not change anything: As with QW’s proposed bankruptcy-exit plan, they would get nothing. If you mean the banks, bondholders, and other creditors who control and essentially own QW, then the answer seems to be yes as long as a couple of kinks can be worked out. (See "Time May Not Be on Donnelley's Side" and "Donnelley Makes Another Pass at Quebecor World".) If you mean the company called “Quebecor” that is headed by P. K. Peladeau, it’s irrelevant; that company is no longer affiliated with QW and in fact has filed litigation to force QW to drop “Quebecor” from its name.
Q: You mean the Wall Street Journal goofed when its story about the proposal included that goofy photo of Quebecor’s annual meeting? And other mainstream reporters were off base when they referred to the acquisition target’s Canadian newspapers? A: Yep. RRD’s press release did not explain that QW and Quebecor are unrelated. For business reporters at newspapers these days, if it’s not in the press release, it’s not news; consulting sources who actually know something about an industry is so Twentieth Century.
Q: Why is Donnelley’s proposal so good for the QW creditors? A: RRD is offering to give the creditors everything they would get from the bankruptcy reorganization, plus some Donnelley stock. And it’s not even asking QW to close the deal, it’s just asking to be named the stalking horse. That means the creditors would be free to seek better offers for parts or all of the company. If Donnelley presents a formal proposal that matches what it has outlined, it’s hard to see why the Quebecor creditors wouldn’t accept it. Q: Did Donnelley make a good move? A: Most folks I’ve talked with think so. Its proposal will prevent the emergence of a rejuvenated, debt-free Quebecor World into an already troubled marketplace. Even if it doesn’t get all of QW, it will have a big say in what happens to the company’s assets.
Q: And what will it do with those assets? A: Shut down the least competitive ones, along with some plants it already owns, to stem the impact of overcapacity on printing prices and to eliminate redundancies. It’s hard to see Donnelley continuing to operate two large rotogravure plants in Nevada
Q: What about competitors? A:Some think the new Donnelley would be large enough to crush the competition, but most people see RRD’s move as a real gift to competitors like Quad/Graphics, Brown, and Transcontinental. As someone noted, you can question how well NewPage’s strategy has worked for NewPage, but there’s no question it has been good for rival Verso Paper.
Q: And what about customers? A: I'm told that one discussion among publishing executives reached this consensus: “We’re screwed.”
R.R. Donnelley’s proposal to take over Quebecor World has been the talk lately of almost everyone involved in producing real books, magazines, and catalogs. (By “real” I mean ink-on-paper publications, as opposed to the kind that can only be read on petrochemical-containing, electricity-burning devices. You know, “dead tree editions”, as opposed to “dead dinosaur editions.”)
There’s been a lot of misunderstanding about what is going on, including some notable goofs by the mainstream media. To clear up the confusion, Dead Tree Edition (with the help of some anonymous correspondents) offers this Q&A guide:
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