Sunday, July 14, 2019

Judge Delays Quad-LSC Merger

Printers' request for expedited trial is rejected.

In another sign that Quad’s proposed acquisition of rival printer LSC Communications isn't going as planned, a federal judge has rejected the printers' request for an expedited trial.

That could delay the deal’s closing until next year, months after the “mid-2019” date the companies’ leaders projected when they announced the deal on October 31, 2018. And it apparently means Quad will have to pay a $45 million “reverse termination fee” to LSC regardless of whether the deal is consummated.

Last week, Judge Charles R. Norgle set the trial date for November 14. It might actually start even later.

“The Court notes that there are multiple criminal cases involving incarcerated defendants scheduled for jury trial during the fall of 2019; in the event of a scheduling conflict, these criminal trials may take priority over the bench trial in this matter,” he wrote.

Quad and LSC had asked the court for an expedited process, pointing out that the U.S. Justice Department’s antitrust division had been investigating the deal for almost eight months before filing a lawsuit last month in opposition. They also noted that their agreement requires Quad to make the $45 million payment to LSC if the deal isn’t closed before October 30 of this year.

Justice objected, saying that “Investigations are not the same as preparing a case for trial. Investigations are focused on deciding whether to bring an enforcement action and, if so, the scope of the lawsuit.”

It also pointed out that the October 30 deadline is entirely within the control of Quad and LSC: They can renegotiate it without the court’s intervention. (But LSC may not be eager to budge.)

“Defendants’ proposal to short-circuit the ordinary judicial process and rush to a “mini trial” to accommodate their preferred schedule would deprive the United States, the Court, and the American public of a full and fair presentation of the factual and economic evidence, which will demonstrate that the proposed merger eliminates important competition,” Justice wrote.

The two megaprinters, as well as some analysts, had expected the deal to get easy antitrust approval because the Justice Department has previously viewed printing as a fragmented industry with thousands of competitors.

Justice, however, took a groundbreaking approach in this case, focusing on markets rather than an industry. It objects to the deal because the combined company would have a virtual monopoly in four U.S. printing (and distribution) markets – medium- to long-run magazines, catalogs, “trade” books (such as best sellers), and textbooks.

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