Quad/Graphics cemented its status today as the General Sherman of the printing industry with the announced closing of its last big Mid-South plant, in Jonesboro, Arkansas.
Quad's rapid downsizing following its purchase of Worldcolor less than two years ago has done for the South's printing industry what the Union general did for Georgia agriculture.
"At one time, the former Quebecor’s Mid-South facilities employed more than 3,000 workers at plants in Memphis, Olive Branch, Miss., Corinth, Miss., Jonesboro, Covington, Tenn., and Dyersburg, Tenn.," Memphis Business Journal noted today. Employees say the Wisconsin company recently shut down the bindery at another former Quebecor/Worldcolor plant, in Franklin, Kentucky.
"So, ALL the Tennessee plants will be closed, ALL the Mississippi plants will be closed, They are starting on ALL the Kentucky plants now........ Looks like a pattern to me," one Tennessean commented on a Topix.com forum.
"Looks like the Second War of Northern aggression if you ask me, to arms," responded a Kentuckian.
Showing posts with label Quebecor World. Show all posts
Showing posts with label Quebecor World. Show all posts
Thursday, March 8, 2012
Tuesday, December 7, 2010
Quad/Graphics Claims Success in 'Quadracizing' Worldcolor
Though they have struggled to bring decentralized Worldcolor operations into the fold, Quad/Graphics executives told Wall Street analysts today they are off to "a fast start" in integrating the two companies.
The bad news of the former Worldcolor's structure is that its "previous acquisitions hadn't been integrated," resulting in "no common manufacturing platform or workflow process," "63 vacation policies" and "94 post-retirement healthcare programs," Quad executives said.
The good news is that Worldcolor had "very little corporate culture to change," they added. That's a huge contrast to Quad, where managers talk of "Quadracizing" almost everything and employees joke about drinking the Kool-Aid.
The executives' comments came during "Investor/Analyst Day" presentations in Wisconsin, which included a tour of the huge printing/mailing facility in Sussex, WI. (Quad posted two presentations on its Web site -- CEO/CFO Overview and Magazine-Catalog Business Overview.)
Quad said "things are progressing as we anticipated" and that projected synergy savings -- annualized $225 million within 24 months -- are "on target."
The printing industry, however, still faces "pricing headwinds due to overcapacity." Quad is putting a dent in that capacity by closing six North American printing plants during the second half of this year -- the "equivalent of closing a large printing company."
Along with shutdown of the former Worldcolor headquarters in Montreal, a 40% headcount reduction in the combined accounting operation, and other "right sizing," Quad is on track to shed nearly 3,000 positions since the July merger.
Some employees displaced from closing (mostly ex-Worldcolor) plants are being transferred to other (mostly legacy Quad) plants. And some customers of the closed plants reported frustrating waits at the peak of a tight paper market while trying to find out where their work was being moved and where their paper shipments should go.
Quad acknowledged that its first post-quarter merger was a bit rough financially, with sales down 2.8% versus what Quad and Worldcolor achieved as separate companies in the 3rd Quarter of 2009. Profitability was also down, with adjusted EBITDA slipping from 15.9% to 14.9%. Once all the post-merger synergies are in place, Quad projects that operating margin will rise to 18.8%, versus 12.6% for rival mega-print R.R. Donnelley.
Other recent articles about Quad/Graphics:
The bad news of the former Worldcolor's structure is that its "previous acquisitions hadn't been integrated," resulting in "no common manufacturing platform or workflow process," "63 vacation policies" and "94 post-retirement healthcare programs," Quad executives said.
The good news is that Worldcolor had "very little corporate culture to change," they added. That's a huge contrast to Quad, where managers talk of "Quadracizing" almost everything and employees joke about drinking the Kool-Aid.
The executives' comments came during "Investor/Analyst Day" presentations in Wisconsin, which included a tour of the huge printing/mailing facility in Sussex, WI. (Quad posted two presentations on its Web site -- CEO/CFO Overview and Magazine-Catalog Business Overview.)
Quad said "things are progressing as we anticipated" and that projected synergy savings -- annualized $225 million within 24 months -- are "on target."
The printing industry, however, still faces "pricing headwinds due to overcapacity." Quad is putting a dent in that capacity by closing six North American printing plants during the second half of this year -- the "equivalent of closing a large printing company."
Along with shutdown of the former Worldcolor headquarters in Montreal, a 40% headcount reduction in the combined accounting operation, and other "right sizing," Quad is on track to shed nearly 3,000 positions since the July merger.
Some employees displaced from closing (mostly ex-Worldcolor) plants are being transferred to other (mostly legacy Quad) plants. And some customers of the closed plants reported frustrating waits at the peak of a tight paper market while trying to find out where their work was being moved and where their paper shipments should go.
Quad acknowledged that its first post-quarter merger was a bit rough financially, with sales down 2.8% versus what Quad and Worldcolor achieved as separate companies in the 3rd Quarter of 2009. Profitability was also down, with adjusted EBITDA slipping from 15.9% to 14.9%. Once all the post-merger synergies are in place, Quad projects that operating margin will rise to 18.8%, versus 12.6% for rival mega-print R.R. Donnelley.
Other recent articles about Quad/Graphics:
Tuesday, July 21, 2009
Quebecor World Exits Bankrupty With a Familiar Name
Quebecor World went back to the future today, emerging from bankruptcy protection under the new but old name "World Color Press".
World Color Press and Quebecor Printing merged a decade ago to form Quebecor World. The company is changing its name to distinguish itself from its former parent, Quebecor Inc., a Canadian media company whose stake in the old Quebecor World is now worthless.
The new World Color Press is now owned mostly by the former lenders and other creditors of Quebecor World. The largest stockholders are Societe Generale, a Montreal-based bank, and Catalyst Fund Limited Partnership of Toronto. With the emergence from bankruptcy reorganization, a new board of directors chaired by Mark A. Angelson -- former CEO of printing rival R.R. Donnelley -- is now setting the company's direction.
The company's announcement said it obtained $800 million in exit financing, about two-thirds of which was used to pay off the special debtor-in-possession financing that kept it going while in Chapter 11. It also said World Color Press stock should begin trading on the Toronto exchange within 30 days.
Quebecor World had originally chosen "Novink" as its new name, but a QW official confirmed to Dead Tree Edition on Sunday that it dropped that name because of negative customer feedback. "Novink" appears in the names of many World Color Press subsidiaries. For example, the legal name of Quebecor World Logistics is now Novink Logistics LLC, though I suspect "World Color" rather than "Novink" will be used in the branding of the subsidiaries.
World Color Press and Quebecor Printing merged a decade ago to form Quebecor World. The company is changing its name to distinguish itself from its former parent, Quebecor Inc., a Canadian media company whose stake in the old Quebecor World is now worthless.
The new World Color Press is now owned mostly by the former lenders and other creditors of Quebecor World. The largest stockholders are Societe Generale, a Montreal-based bank, and Catalyst Fund Limited Partnership of Toronto. With the emergence from bankruptcy reorganization, a new board of directors chaired by Mark A. Angelson -- former CEO of printing rival R.R. Donnelley -- is now setting the company's direction.
The company's announcement said it obtained $800 million in exit financing, about two-thirds of which was used to pay off the special debtor-in-possession financing that kept it going while in Chapter 11. It also said World Color Press stock should begin trading on the Toronto exchange within 30 days.
Quebecor World had originally chosen "Novink" as its new name, but a QW official confirmed to Dead Tree Edition on Sunday that it dropped that name because of negative customer feedback. "Novink" appears in the names of many World Color Press subsidiaries. For example, the legal name of Quebecor World Logistics is now Novink Logistics LLC, though I suspect "World Color" rather than "Novink" will be used in the branding of the subsidiaries.
Sunday, July 19, 2009
Quebecor World Ready To Abandon "Novink" and Bankruptcy Protection
Quebecor World will exit from bankruptcy protection this coming week, but not under the widely reported name "Novink," according to a company official.
"We will exit in the coming week," the official told Dead Tree Edition today, taking issue with my article from two days ago suggesting that the company's bankruptcy reorganization has been delayed.
It's true that nothing in the court documents describing the July 27 hearing about the "$1 press" says that the hearing must be held before Quebecor World can exit from bankruptcy protection. It is common in Chapter 11 cases to have some individual claims settled after the company exits from bankruptcy protection, someone pointed out.
Given Quebecor World's size and apparent value, none of the claims to be resolved in the bankruptcy case seems large enough to be a show stopper. And nothing says Quebecor World will close up shop or turn into a pumpkin if its reorganization is not consummated by midnight Tuesday, when its debtor-in-possession financing is set to expire. Financing deals can be extended.
Responding to customer feedback, Quebecor World has decided not to rename itself Novink when it emerges from bankruptcy protection, the official said. Some reports indicated the name was to be prounounced "new-vink" as a bilingual combination of "nouveau" and "ink".
It seems that the name was about as popular as le turd dans le punchbowl, if you follow my attempt at combining French and English. (Perhaps QW officials were concerned that French-challenged Americans would mispronounce the name as "Newsweek", which according to Gawker has not exactly been a model of humane or rational management the past few days.)
What is clear is that this is a complex case involving scores of subsidiaries and pension plans, as well as the coordination of bankruptcy courts and laws in the U.S. and Canada. That complexity has often confounded observers, such as those of us who thought R. R. Donnelley's first "stalking-horse" bid was a slam dunk because we overlooked the critical issue of timing.
What also seems clear is that the company will be free of much that weighed it down before its Chapter 11 filing, including a heavy debt load and its money-losing European operation. And the choice of Mark A. Angelson, the acquisition-minded former Donnelley CEO, to become chairman of the new company suggests that things could get interesting for the North American printing industry.
"We will exit in the coming week," the official told Dead Tree Edition today, taking issue with my article from two days ago suggesting that the company's bankruptcy reorganization has been delayed.
It's true that nothing in the court documents describing the July 27 hearing about the "$1 press" says that the hearing must be held before Quebecor World can exit from bankruptcy protection. It is common in Chapter 11 cases to have some individual claims settled after the company exits from bankruptcy protection, someone pointed out.
Given Quebecor World's size and apparent value, none of the claims to be resolved in the bankruptcy case seems large enough to be a show stopper. And nothing says Quebecor World will close up shop or turn into a pumpkin if its reorganization is not consummated by midnight Tuesday, when its debtor-in-possession financing is set to expire. Financing deals can be extended.
Responding to customer feedback, Quebecor World has decided not to rename itself Novink when it emerges from bankruptcy protection, the official said. Some reports indicated the name was to be prounounced "new-vink" as a bilingual combination of "nouveau" and "ink".
It seems that the name was about as popular as le turd dans le punchbowl, if you follow my attempt at combining French and English. (Perhaps QW officials were concerned that French-challenged Americans would mispronounce the name as "Newsweek", which according to Gawker has not exactly been a model of humane or rational management the past few days.)
What is clear is that this is a complex case involving scores of subsidiaries and pension plans, as well as the coordination of bankruptcy courts and laws in the U.S. and Canada. That complexity has often confounded observers, such as those of us who thought R. R. Donnelley's first "stalking-horse" bid was a slam dunk because we overlooked the critical issue of timing.
What also seems clear is that the company will be free of much that weighed it down before its Chapter 11 filing, including a heavy debt load and its money-losing European operation. And the choice of Mark A. Angelson, the acquisition-minded former Donnelley CEO, to become chairman of the new company suggests that things could get interesting for the North American printing industry.
Friday, July 17, 2009
Quebecor World's Reorganization Delayed?
Please see "Quebecor World Ready To Abandon 'Novink' and Bankruptcy Protection", which clarifies and updates the information in this article.
Quebecor World's emergence from bankruptcy protection has apparently been delayed a couple of weeks, at least partly by a $1 printing press.
The big printing company had hoped to exit Chapter 11 (and the Canadian equivalent) this week with a new name and new board of directors, but a U.S. bankruptcy court has scheduled a July 27 hearing in the case. That is six days after the company’s debtor-in-possession financing is scheduled to expire.
Quebecor World has been silent about the case since announcing on July 2 that U.S. and Canadian courts had approved its reorganization plan and that it "anticipates the consummation of the Plans to occur in mid-July 2009."
The mainstream news media widely reported that announcement without noting, as Dead Tree Edition did, that there were still hurdles to clear. (So this is business journalism in the 21st century: One of the biggest bankruptcies in Canadian history is covered by professional reporters relying solely on news releases -- and a sleep-deprived amateur trying to make sense of dense legal documents.)
Despite various motions and hearings this week, the status of the joint Canadian-U.S. bankruptcy case is a bit murky. Quebecor World worked out a disagreement with a group of lenders and has tweaked the reorganization plan to settle some small claims. But at least one settlement would apparently affect the creditors enough that they must be given a chance to object – thus the July 27 hearing.
The settlement involves Quebecor World’s lease of a flexographic press in Merced, CA from Banc of America Leasing & Capital (which, despite the half-French, half-English name, is neither Canadian nor affiliated with Bank of America). The leasing company had filed a claim saying Quebecor World had not honored terms of the lease, which expired last August.
World Color Press, which was later purchased by QW, signed the lease in 1994, apparently as part of a lease-purchase arrangement. Capital-intensive businesses often use such deals to finance equipment purchases.
The settlement calls for Quebecor World to pay $144,000 cash for outstanding lease payments and for the leasing company to be recognized as having claims in the bankruptcy case of more than $1.3 million. That would cut into the compensation to be received by other creditors; the hearing will give those creditors a chance to object to the settlement.
Quebecor World will also have the option of purchasing the Cerutti press for $1. Because the press was designed to produce telephone books, a declining market, it may not be worth much more than $1.
There is no word on whether Quebecor World has worked out or overcome all other objections to its reorganization plan or whether it can get its financing extended. And there's no word on whether Quebecor World leaders are calling R.R. Donnelley and saying, "Now about that last offer . . ."
Quebecor World's emergence from bankruptcy protection has apparently been delayed a couple of weeks, at least partly by a $1 printing press.
The big printing company had hoped to exit Chapter 11 (and the Canadian equivalent) this week with a new name and new board of directors, but a U.S. bankruptcy court has scheduled a July 27 hearing in the case. That is six days after the company’s debtor-in-possession financing is scheduled to expire.
Quebecor World has been silent about the case since announcing on July 2 that U.S. and Canadian courts had approved its reorganization plan and that it "anticipates the consummation of the Plans to occur in mid-July 2009."
The mainstream news media widely reported that announcement without noting, as Dead Tree Edition did, that there were still hurdles to clear. (So this is business journalism in the 21st century: One of the biggest bankruptcies in Canadian history is covered by professional reporters relying solely on news releases -- and a sleep-deprived amateur trying to make sense of dense legal documents.)
Despite various motions and hearings this week, the status of the joint Canadian-U.S. bankruptcy case is a bit murky. Quebecor World worked out a disagreement with a group of lenders and has tweaked the reorganization plan to settle some small claims. But at least one settlement would apparently affect the creditors enough that they must be given a chance to object – thus the July 27 hearing.
The settlement involves Quebecor World’s lease of a flexographic press in Merced, CA from Banc of America Leasing & Capital (which, despite the half-French, half-English name, is neither Canadian nor affiliated with Bank of America). The leasing company had filed a claim saying Quebecor World had not honored terms of the lease, which expired last August.
World Color Press, which was later purchased by QW, signed the lease in 1994, apparently as part of a lease-purchase arrangement. Capital-intensive businesses often use such deals to finance equipment purchases.
The settlement calls for Quebecor World to pay $144,000 cash for outstanding lease payments and for the leasing company to be recognized as having claims in the bankruptcy case of more than $1.3 million. That would cut into the compensation to be received by other creditors; the hearing will give those creditors a chance to object to the settlement.
Quebecor World will also have the option of purchasing the Cerutti press for $1. Because the press was designed to produce telephone books, a declining market, it may not be worth much more than $1.
There is no word on whether Quebecor World has worked out or overcome all other objections to its reorganization plan or whether it can get its financing extended. And there's no word on whether Quebecor World leaders are calling R.R. Donnelley and saying, "Now about that last offer . . ."
Wednesday, July 15, 2009
Quebecor World Update: Maybe Tomorrow
News Flash: Quebecor World has apparently worked out a deal with some of its lenders and goes back to U.S. bankruptcy court at 3:30 EDT tomorrow (July 16) for a hearing on an amended reorganization plan.
Here's a link to the agenda and QW's motion on its amended plan. It's not clear whether all of the objections to Quebecor World's reorganization plan can be resolved at tomorrow's hearing.
In turning down one of three takeover offers from rival printer R.R. Donnelley last month, Quebecor World said it could have difficulty continuing to operate if it doesn't exit bankruptcy protection by July 21. That's when its debtor-in-possession financing runs out.
Here's a link to the agenda and QW's motion on its amended plan. It's not clear whether all of the objections to Quebecor World's reorganization plan can be resolved at tomorrow's hearing.
In turning down one of three takeover offers from rival printer R.R. Donnelley last month, Quebecor World said it could have difficulty continuing to operate if it doesn't exit bankruptcy protection by July 21. That's when its debtor-in-possession financing runs out.
Friday, July 3, 2009
Quebecor World Reorganization Still Faces Hurdles
Quebecor World may emerge from bankruptcy reorganization in 10 days if it can work out details with creditors, lenders and the Internal Revenue Service.
The big printing company's reorganization plan was approved by a U.S. bankruptcy court Thursday, two days after getting approval from a Canadian court. But there are some strings attached.
The U.S. court order says Quebecor World needs a decision from the IRS regarding the proposed settlement of $22.5 million in back taxes. And both courts say the company needs to work out with its note holders and its creditors committee "an acceptable compromise" on the wording of the articles of reorganization and a financial document.
If the conditions have not been met, both courts will hold a hearing on July 13 to determine next steps. If the conditions have been met, the company will emerge from bankruptcy protection that day -- reportedly with the new name of "Novink".
"This is a major milestone in successfully restructuring our Company to benefit all stakeholders,” Jacques Mallette, President and CEO, said yesterday about the courts' decisions. “We look forward to exiting creditor protection in mid-July and moving forward with the implementation of our business plan as a strong competitor in the industry.”
Current stockholders in the company would receive no compensation. Quebecor World's lenders and creditors are to become its owners, with the company's stock being traded on the Toronto Stock Exchange.
The big printing company's reorganization plan was approved by a U.S. bankruptcy court Thursday, two days after getting approval from a Canadian court. But there are some strings attached.
The U.S. court order says Quebecor World needs a decision from the IRS regarding the proposed settlement of $22.5 million in back taxes. And both courts say the company needs to work out with its note holders and its creditors committee "an acceptable compromise" on the wording of the articles of reorganization and a financial document.
If the conditions have not been met, both courts will hold a hearing on July 13 to determine next steps. If the conditions have been met, the company will emerge from bankruptcy protection that day -- reportedly with the new name of "Novink".
"This is a major milestone in successfully restructuring our Company to benefit all stakeholders,” Jacques Mallette, President and CEO, said yesterday about the courts' decisions. “We look forward to exiting creditor protection in mid-July and moving forward with the implementation of our business plan as a strong competitor in the industry.”
Current stockholders in the company would receive no compensation. Quebecor World's lenders and creditors are to become its owners, with the company's stock being traded on the Toronto Stock Exchange.
Sunday, June 28, 2009
Quebecor World: Has the Stalked Become the Stalker?
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!
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!
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".
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."
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.
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:
Wednesday, May 13, 2009
R.R. Donnelley Stalks Quebecor World
For many large American publishers there are only three printing companies. Soon, there may be only two.
R.R. Donnelley stunned the printing and publishing industries today by announcing its offer to be the "stalking-horse" bidder for rival Quebecor World, which is about to emerge from bankruptcy reorganization. It offered Quebecor's creditors, who essentially own the company, everything they would receive from the reorganization (which for many unsecured creditors is at most 50 cents on the dollar) plus 15% ownership of Donnelley. Donnelley stock closed down 9% today, making the stock being offered to the Quebecor creditors worth about $360 million. (See also "Q&A on the Donnelley-Quebecor Deal".)
Donnelley's proposal letter expressed confidence that the deal would be approved by the U.S. and Canadian governments, but the word "antitrust" was on the minds and lips of many major buyers of printing today.
Donnelley may point out to government agencies that the United States has thousands of printing companies. But only three -- Donnelley, Quebecor, and the privately held Quad/Graphics -- have rotogravure publication presses. And only those three have co-mail pools that typically contain at least several million magazines and/or catalogs. As good as they may be, "second-tier" printers with only offset presses and smaller co-mail pools simply cannot compete with the Big Three for much of the long-run catalog and magazine work in the U.S.
For parts of the market, such as for rotogravure magazines inserted into newspapers (like Parade and American Profile) and for telephone directories, it's really the Big Two, with Quad mostly or completely out of the picture. Quad has been trying to break into the newspaper-insert magazine market for years and reportedly built its Martinsburg, WV plant because it (mistakenly) thought it had a deal to print USA Weekend.
But a foray into coupon printing years ago that nearly bankrupted the company has engraved a commandment into Quad's corporate DNA: Don't get into price wars on printing. The Wisconsin-based company tends to compete instead with features like high-speed binderies and efficient co-mail pools -- which are irrelevant in the if-we-get-this-business-at-this-price-will-we-have-any-profit-margin? world of printing Sunday newspapers.
With its stalking-horse bid, Donnelley would set the bar for anyone wanting to buy all or part of Quebecor World, though the creditors would still be able to seek better deals. Even if the proposal does not pass anti-trust muster, it could be a winner for Donnelley by preventing competitors from buying Quebecor plants at fire-sale prices and then using their nearly debt-free status to undercut Donnelley.
I would love to hear your concerns, questions, or insights about the Donnelley proposal. Please email them to Dead.Tree.Edition@gmail.com. I promise not to attribute any comments to you or your company without your authorization.
R.R. Donnelley stunned the printing and publishing industries today by announcing its offer to be the "stalking-horse" bidder for rival Quebecor World, which is about to emerge from bankruptcy reorganization. It offered Quebecor's creditors, who essentially own the company, everything they would receive from the reorganization (which for many unsecured creditors is at most 50 cents on the dollar) plus 15% ownership of Donnelley. Donnelley stock closed down 9% today, making the stock being offered to the Quebecor creditors worth about $360 million. (See also "Q&A on the Donnelley-Quebecor Deal".)
Donnelley's proposal letter expressed confidence that the deal would be approved by the U.S. and Canadian governments, but the word "antitrust" was on the minds and lips of many major buyers of printing today.
Donnelley may point out to government agencies that the United States has thousands of printing companies. But only three -- Donnelley, Quebecor, and the privately held Quad/Graphics -- have rotogravure publication presses. And only those three have co-mail pools that typically contain at least several million magazines and/or catalogs. As good as they may be, "second-tier" printers with only offset presses and smaller co-mail pools simply cannot compete with the Big Three for much of the long-run catalog and magazine work in the U.S.
For parts of the market, such as for rotogravure magazines inserted into newspapers (like Parade and American Profile) and for telephone directories, it's really the Big Two, with Quad mostly or completely out of the picture. Quad has been trying to break into the newspaper-insert magazine market for years and reportedly built its Martinsburg, WV plant because it (mistakenly) thought it had a deal to print USA Weekend.
But a foray into coupon printing years ago that nearly bankrupted the company has engraved a commandment into Quad's corporate DNA: Don't get into price wars on printing. The Wisconsin-based company tends to compete instead with features like high-speed binderies and efficient co-mail pools -- which are irrelevant in the if-we-get-this-business-at-this-price-will-we-have-any-profit-margin? world of printing Sunday newspapers.
With its stalking-horse bid, Donnelley would set the bar for anyone wanting to buy all or part of Quebecor World, though the creditors would still be able to seek better deals. Even if the proposal does not pass anti-trust muster, it could be a winner for Donnelley by preventing competitors from buying Quebecor plants at fire-sale prices and then using their nearly debt-free status to undercut Donnelley.
I would love to hear your concerns, questions, or insights about the Donnelley proposal. Please email them to Dead.Tree.Edition@gmail.com. I promise not to attribute any comments to you or your company without your authorization.
Sunday, March 29, 2009
Quebecor Closing Covington Plant
Quebecor World told customers and plant employees in the past few days that it is shutting its Covington, TN printing plant, sources tell Dead Tree Edition.
Quebecor World still lists the Covington plant on its Web site without reference to it closing, but the sources say the plant will be shuttered within a couple of months. Quebecor World's 2008 annual report, released last week, said the printing industry "is still in the process of consolidating and is still suffering from overcapacity."
"We are also aggressively aligning our cost structure to mitigate the impact of the economic downturn," the report added, without mentioning any plant closures other than the three that Quebecor World implemented last year.
Covington's pressroom has mostly long-cutoff presses -- that is, heatset web offset presses that typically produce pages that are 10 7/8" tall. Most magazines and catalogs have moved to short-cutoff presses, which produce pages that are only 10 1/2" tall, thereby reducing paper and ink costs. And once they make the move to short-cutoff, they rarely go back.
This is the second big hit in barely three months to the town of 9,000 north of Memphis. In December, AbitibiBowater announced the closure of its NuWay converting facility in Covington, which turned newsprint into coated paper.
Quebecor World still lists the Covington plant on its Web site without reference to it closing, but the sources say the plant will be shuttered within a couple of months. Quebecor World's 2008 annual report, released last week, said the printing industry "is still in the process of consolidating and is still suffering from overcapacity."
"We are also aggressively aligning our cost structure to mitigate the impact of the economic downturn," the report added, without mentioning any plant closures other than the three that Quebecor World implemented last year.
Covington's pressroom has mostly long-cutoff presses -- that is, heatset web offset presses that typically produce pages that are 10 7/8" tall. Most magazines and catalogs have moved to short-cutoff presses, which produce pages that are only 10 1/2" tall, thereby reducing paper and ink costs. And once they make the move to short-cutoff, they rarely go back.
This is the second big hit in barely three months to the town of 9,000 north of Memphis. In December, AbitibiBowater announced the closure of its NuWay converting facility in Covington, which turned newsprint into coated paper.
Monday, December 8, 2008
Another Chapter 11 Filing Dings AbitibiBowater
Today’s Chapter 11 filing by Tribune Company could put a multimillion-dollar hurt on AbitibiBowater, another newsprint manufacturer, and perhaps some fellow newspaper publishers.
Tribune filed papers with a Delaware bankruptcy court indicating it owed nearly $7 million in “trade debt” to Abitibi -- $4.192 million to the Abitibi Consolidated subsidiary and $2.77 million to the Bowater subsidiary.
Also making Tribune’s list of top-30 creditors was “SP Newsprint Company c/o White Birch Paper Company” of Greenwich, CT, with $5.153 million in trade debt. SP is an Atlanta-based partnership owned by three newspaper chains (Cox, McClatchy, and Media General), while White Birch is a separate, privately owned newsprint manufacturer based in Greenwich.
White Birch was presumably a marketing agent or broker of SP paper sold to Tribune, but it's not clear which company is left holding the bag.
AbibitiBowater also has $13.3 million tied up in Quebecor World’s Chapter 11 filing from January. Put together the Quebecor and Tribune debts and you would have enough to buy 81% of AbitibiBowater stock, which closed down 10% today (and 98% from a year ago) at 43 cents per share. The heavily leveraged paper company lists assets of nearly $10 billion but has a market cap of only $25 million.
Quebecor World says it is in the process of exiting Chapter 11, but it’s not clear what kind of compensation its creditors would receive. Tribune’s various newspapers and other media properties are still operating, but the prospects are bleak for major newspaper chains with lots of debt – and for the paper companies that supply them.
Not making the Top 30 list was Catalyst Paper, the dominant newsprint supplier in the West and reportedly a major supplier to Tribune’s Los Angeles Times and other newspapers. That indicates Catalyst's exposure is less than the $1.691 million that the #30 creditor had.
The top of the list is dominated by holders of various debt instruments. The largest trade debt, $23.691 million, is owed to Warner Bros. Television, #13 on the list. Just below that Time Warner subsidiary is Mark Willes, CEO of Times Mirror until Tribune purchased it, with $11.229 million in “retirement and deferred comp”. Three other retired executives also made the list.
Tribune filed papers with a Delaware bankruptcy court indicating it owed nearly $7 million in “trade debt” to Abitibi -- $4.192 million to the Abitibi Consolidated subsidiary and $2.77 million to the Bowater subsidiary.
Also making Tribune’s list of top-30 creditors was “SP Newsprint Company c/o White Birch Paper Company” of Greenwich, CT, with $5.153 million in trade debt. SP is an Atlanta-based partnership owned by three newspaper chains (Cox, McClatchy, and Media General), while White Birch is a separate, privately owned newsprint manufacturer based in Greenwich.
White Birch was presumably a marketing agent or broker of SP paper sold to Tribune, but it's not clear which company is left holding the bag.
AbibitiBowater also has $13.3 million tied up in Quebecor World’s Chapter 11 filing from January. Put together the Quebecor and Tribune debts and you would have enough to buy 81% of AbitibiBowater stock, which closed down 10% today (and 98% from a year ago) at 43 cents per share. The heavily leveraged paper company lists assets of nearly $10 billion but has a market cap of only $25 million.
Quebecor World says it is in the process of exiting Chapter 11, but it’s not clear what kind of compensation its creditors would receive. Tribune’s various newspapers and other media properties are still operating, but the prospects are bleak for major newspaper chains with lots of debt – and for the paper companies that supply them.
Not making the Top 30 list was Catalyst Paper, the dominant newsprint supplier in the West and reportedly a major supplier to Tribune’s Los Angeles Times and other newspapers. That indicates Catalyst's exposure is less than the $1.691 million that the #30 creditor had.
The top of the list is dominated by holders of various debt instruments. The largest trade debt, $23.691 million, is owed to Warner Bros. Television, #13 on the list. Just below that Time Warner subsidiary is Mark Willes, CEO of Times Mirror until Tribune purchased it, with $11.229 million in “retirement and deferred comp”. Three other retired executives also made the list.
Monday, December 1, 2008
Maybe we should call it AbitibiUnderwater
Early this year, paper giant AbitibiBowater was stiffed for $13.3 million when Quebecor World filed for Chapter 11. That seemed like a minor wound at the time for a company reporting more than $10 billion in assets, but today it would have been almost enough to buy control of AbitibiBowater.
Just 13 months ago, North America’s two largest newsprint producers joined forces to create AbitibiBowater. Stock of the new company closed at $36.77 per share that day amidst investor optimism that the combination would lead to market discipline – that is, coping with reduced demand by shutting machines rather than cutting prices. In January, Citigroup chose it as a top stock pick for 2008.
AbitibiBowater stock closed today at 53 cents, giving the company a market capitalization of only $30.5 million. That’s less than 10 months after it sold a single mill (Snowflake, AZ) for $161 million.
The shares went as low as 43 cents a couple of weeks ago until a market analyst reported that demand for pulp was picking up in Asia. (Nope. Pulp prices are still collapsing in Asia and the rest of the world.)
It turns out that becoming the dominant newsprint producer in North America is as worthwhile a pursuit as striving to be the world’s best catcher of live hand grenades. Meanwhile, the crown jewel of the Bowater half – the coated-paper mill in Catawba, SC – has lost its luster now that the markets for coated have tanked, currency shifts have taken away the mill's position as a low-cost producer, and quality problems reportedly caused it to stop making rotogravure papers.
The publication-paper market in the least danger of crashing is the one for high-end supercalendered grades (SCA, SCA+) that compete with higher-priced coated groundwood. But one of the first things AbitibiBowater did after the merger is close its only mill that played in the true SCA market.
How can a company with $10 billion in assets have a market value of barely $30 million? Highly leveraged paper companies will struggle more than ever in this recession, and AbitibiBowater is among those with "the most pressing liquidity problems,” Fitch Ratings said last week.
It looks as if Wall Street is betting that another major Canadian/American company will join Quebecor World in Chapter 11.
Dec. 3 Update: S&P downgraded AbitibiBowater's credit rating two notches today, to CCC, and RISI reported that the company had rescinded the December increase in newsprint prices. RISI also said this week that newsprint prices continued rising in November and predicted that the price decline next year will be gradual despite falling demand.
Just 13 months ago, North America’s two largest newsprint producers joined forces to create AbitibiBowater. Stock of the new company closed at $36.77 per share that day amidst investor optimism that the combination would lead to market discipline – that is, coping with reduced demand by shutting machines rather than cutting prices. In January, Citigroup chose it as a top stock pick for 2008.
AbitibiBowater stock closed today at 53 cents, giving the company a market capitalization of only $30.5 million. That’s less than 10 months after it sold a single mill (Snowflake, AZ) for $161 million.
The shares went as low as 43 cents a couple of weeks ago until a market analyst reported that demand for pulp was picking up in Asia. (Nope. Pulp prices are still collapsing in Asia and the rest of the world.)
It turns out that becoming the dominant newsprint producer in North America is as worthwhile a pursuit as striving to be the world’s best catcher of live hand grenades. Meanwhile, the crown jewel of the Bowater half – the coated-paper mill in Catawba, SC – has lost its luster now that the markets for coated have tanked, currency shifts have taken away the mill's position as a low-cost producer, and quality problems reportedly caused it to stop making rotogravure papers.
The publication-paper market in the least danger of crashing is the one for high-end supercalendered grades (SCA, SCA+) that compete with higher-priced coated groundwood. But one of the first things AbitibiBowater did after the merger is close its only mill that played in the true SCA market.
How can a company with $10 billion in assets have a market value of barely $30 million? Highly leveraged paper companies will struggle more than ever in this recession, and AbitibiBowater is among those with "the most pressing liquidity problems,” Fitch Ratings said last week.
It looks as if Wall Street is betting that another major Canadian/American company will join Quebecor World in Chapter 11.
Dec. 3 Update: S&P downgraded AbitibiBowater's credit rating two notches today, to CCC, and RISI reported that the company had rescinded the December increase in newsprint prices. RISI also said this week that newsprint prices continued rising in November and predicted that the price decline next year will be gradual despite falling demand.
Sunday, November 23, 2008
Is Quebecor back from the dead?
Is Quebecor World ready for a "return to greatness," as Printing Impressions suggests in the glowing cover story of its latest issue?
At first blush, it's hard to see an exciting future for a company that has already lost $1 billion this year after going Chapter 11. After all, the giant printing company acknowledged in a financial filing recently that it faced "challenging market conditions, resulting in price erosion and decreased volume in most of the Company's markets."
But dig a little deeper and you will find some signs of strength. Most of the $1 billion loss was a writedown of the albatross that almost brought QW to ruin, the European division that it sold in June. QW World has not used much of its debtor-in-possession financing since filing for Chapter 11 in January and experienced positive cash flow, though barely, in the third quarter.
An apparent blessing of the Chapter 11 filing, at least so far, is that counterparties canceled all currency-hedging contracts with QW, which has Canadian plants that produce items for the U.S. market. The U.S. dollar has gained more than 20% on the Canadian dollar since then.
Another blessing came from the U.S. Postal Service last year when it overhauled rates for Periodicals and Standard flats mail in ways that enhanced the incentives for co-mailing. Only R.R. Donnelley and Quad/Graphics are in the same league as Quebecor when it comes to large co-mail and dropship pools for mailed flats, and in this case size does matter.
Of the three, Quebecor's efforts have been more focused on the small mailers (with circulation of, say, less than 100,000) that have flocked to co-mailing in the past year or so and that gain such huge postal savings when participating in QW's large co-mail pools.
I was at an industry function recently where several executives talked of there being only three printers -- QW, RRD, and Quad. Certainly there are others, some of them sizeable companies with stronger credit histories than QW. But without rotogravure presses (rumored to be more profitable than offset), huge co-mail pools, and extensive dropship networks, it's hard to see how they can compete with the Big Three for most medium- and large-circulation publications.
Printing Impressions quotes company executives as saying the new QW is more streamlined and has fewer silos, doing innovative things like using available magazine press capacity (which no doubt there is a lot of these days) "to meet peak four-color educational textbook demand." And QW has definitely been more aggressive in recent months about reaching out to customers and potential customers -- for example, sponsoring and participating in webinars held by Folio: and Multichannel Merchant.
The big question is whether QW is now strong enough to ride out the turbulence of a severe recession and lean enough to thrive as many customers permanently reduce or even eliminate their demand for printing.
At first blush, it's hard to see an exciting future for a company that has already lost $1 billion this year after going Chapter 11. After all, the giant printing company acknowledged in a financial filing recently that it faced "challenging market conditions, resulting in price erosion and decreased volume in most of the Company's markets."
But dig a little deeper and you will find some signs of strength. Most of the $1 billion loss was a writedown of the albatross that almost brought QW to ruin, the European division that it sold in June. QW World has not used much of its debtor-in-possession financing since filing for Chapter 11 in January and experienced positive cash flow, though barely, in the third quarter.
An apparent blessing of the Chapter 11 filing, at least so far, is that counterparties canceled all currency-hedging contracts with QW, which has Canadian plants that produce items for the U.S. market. The U.S. dollar has gained more than 20% on the Canadian dollar since then.
Another blessing came from the U.S. Postal Service last year when it overhauled rates for Periodicals and Standard flats mail in ways that enhanced the incentives for co-mailing. Only R.R. Donnelley and Quad/Graphics are in the same league as Quebecor when it comes to large co-mail and dropship pools for mailed flats, and in this case size does matter.
Of the three, Quebecor's efforts have been more focused on the small mailers (with circulation of, say, less than 100,000) that have flocked to co-mailing in the past year or so and that gain such huge postal savings when participating in QW's large co-mail pools.
I was at an industry function recently where several executives talked of there being only three printers -- QW, RRD, and Quad. Certainly there are others, some of them sizeable companies with stronger credit histories than QW. But without rotogravure presses (rumored to be more profitable than offset), huge co-mail pools, and extensive dropship networks, it's hard to see how they can compete with the Big Three for most medium- and large-circulation publications.
Printing Impressions quotes company executives as saying the new QW is more streamlined and has fewer silos, doing innovative things like using available magazine press capacity (which no doubt there is a lot of these days) "to meet peak four-color educational textbook demand." And QW has definitely been more aggressive in recent months about reaching out to customers and potential customers -- for example, sponsoring and participating in webinars held by Folio: and Multichannel Merchant.
The big question is whether QW is now strong enough to ride out the turbulence of a severe recession and lean enough to thrive as many customers permanently reduce or even eliminate their demand for printing.
Monday, November 3, 2008
Making a Stink About EnviroInk
We're not the only ones wondering what to make of Quebecor World's EnviroInk announcement. (See "Green Ink or Greenwash Ink".)
At a recent presentation to customers, our contacts tell us, a Quebecor official said her phone had been "ringing off the wall" since the announcement. Several customers peppered her with questions about the ink's environmental significance, such as whether it was greener than standard heatset-offset inks and whether it represented an improvement over Quebecor's old practices. She was unable to answer those questions but promised future clarifications.
She did say the ink usually contained at least 25% renewable resources, which is more than the minimum required for SoySeal inks. The main difference is that the renewables in EnviroInk come mostly from trees and those in SoySeal inks come from soybeans.
(Before you jump to conclusions about soy ink being greener because it "saves trees," consider this question: Which would be a more environmentally friendly use of a piece of land, soy farming or working forest? Besides, no one cuts down trees to make pine rosin; it's a byproduct of making pulp.)
Quebecor has confirmed that use of the EnviroInk symbol would not violate federal "greenwashing" standards. But several who heard the presentation nevertheless expressed concern that customers would indeed view the symbol as a form of greenwashing.
At a recent presentation to customers, our contacts tell us, a Quebecor official said her phone had been "ringing off the wall" since the announcement. Several customers peppered her with questions about the ink's environmental significance, such as whether it was greener than standard heatset-offset inks and whether it represented an improvement over Quebecor's old practices. She was unable to answer those questions but promised future clarifications.
She did say the ink usually contained at least 25% renewable resources, which is more than the minimum required for SoySeal inks. The main difference is that the renewables in EnviroInk come mostly from trees and those in SoySeal inks come from soybeans.
(Before you jump to conclusions about soy ink being greener because it "saves trees," consider this question: Which would be a more environmentally friendly use of a piece of land, soy farming or working forest? Besides, no one cuts down trees to make pine rosin; it's a byproduct of making pulp.)
Quebecor has confirmed that use of the EnviroInk symbol would not violate federal "greenwashing" standards. But several who heard the presentation nevertheless expressed concern that customers would indeed view the symbol as a form of greenwashing.
Monday, October 13, 2008
Green Ink or Greenwash Ink?
Quebecor World Inc. made an interesting but rather cryptic announcement last week (http://www.quebecorworldinc.com/news.aspx?id=1970) about "environmentally friendly" inks.
The big printing company is "offering its customers the option to use its new Enviroink™ logo on their printed products to signify they are using heatset inks that contain a minimum of 20 percent, by weight, renewable resources." The offer presumably applies only to customers using heatset offset printing, not those using coldset or rotogravure.
A Quebecor brochure says the renewable resources are pine rosins (a pulp byproduct) and vegetable oils. What neither the announcement nor the brochure say, however, is how these inks compare to what it used to use or what other printers use. Is the use of 20% renewable resources in this type of ink normal, or does it really represent something special? No doubt Transcontinental, R. R. Donnelley, Quad/Graphics, and others will eventually have something to say about the matter.
And doesn't it make you wonder what the other 80% contains?
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