RR Donnelley was split in three two years ago in order to increase value to shareholders and one arm is now subject to a takeover by QuadGraphics. LSC alone has sales of $3.9 billion with 22,000 staff across 46 factories in the US and Mexico. The move will put much of the high volume magazine and catalogue print capacity in the arms of a single company, raising fears that publishers will need to pay more for their print going forwards.
The merger will also strengthen Quad's hand in book printing, retail inserts and direct mail. Book publishers will get an end to end service platform to manage stock, online ordering, digital print built on HP PageWide T series presses and integrated finishing lines for greater scope for versioning and slicing time to market.
It is also indicative of the decline in circulation of the big hitting magazines and retail catalogues that dominated print in the twentieth century. Quad believes that these customers can migrate to a more complete communications offering where print has a key role to play but is not alone in delivering marketing messages. Its services include content creation and media buying across publications, television and radio. On the print side it is involved in inshore signage for retailers as well as catalogue printing.
This is what it calls Quad 3.0, “our strategy to create more value by leveraging our strong print foundation as part of a much larger, more robust integrated marketing solutions offering, deliver cost and time savings opportunities for our clients” according to Joel Quadracci, CEO who sees the opportunity for the business to become a marketing solutions partner. There will be greater scope for cross selling by exploiting LSC's production base, its customers and investments in workflow and data management.
The move will result in savings of $135 million within two years says Quad, $60 million coming from closing excess capacity. The remainder will come from eliminating duplication and administration. The LSCplants are most likely to suffer: they are less well invested and with a different culture to Quad.
Quad has experience in consolidating multi-site print groups having brought its own operations together with World Color and later Versus and Brown Printing. It failed to buy book printer Courier Corporation which was instead purchased by LSC Communications.
The deal is being funded through Quad shares, though the Quadracci family will retain control over a business that was founded 47 years ago by Harry Quadracci, paying down LSC debt and refinancing at the more advantageous rates that Quad has been able to achieve historically. The deal is expected to be complete mid way through next year, though it is subject to regulatory approvals.