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.

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.

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.

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 United States.

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.