Consolidation in Commercial Printing Industry Gains Steam: Two Big Printers Expected to Merge

According to Wall Street Journal, privately held Quad/Graphics Inc. of the U.S. is expected to acquire Canadian rival World Color Press Inc. for roughly $1.3 billion to $1.4 billion, said people familiar with the matter, in a deal that would create North America's second-largest commercial printer by sales, behind industry giant R.R. Donnelley & Sons Co.


Under the plan, these people said, shareholders of Toronto-listed World Color, which prints such magazines as Sports Illustrated and Rolling Stone, as well as the Crate & Barrel catalog and Yellow Book directory, would get a 40% stake in the newly combined company. The new company would then list on a U.S. stock exchange, they said, in effect bringing Quad/Graphics, whose clients include Newsweek, GQ and the L.L. Bean catalog, to the public market for the first time since its founding in 1971.

Quad/Graphics, based in Sussex, Wis., has 11,500 employees and 11 plants, most of them in the U.S. Its annual sales are around $2 billion. Montreal-based World Color, with a market capitalization of around $730 million, has about 18,000 employees and annual sales of around $3 billion, with about 30% of that coming from Canada and Latin America.

If investors value the new company at the same multiple to earnings as they do R.R. Donnelley, it would be worth roughly $5.25 billion. It could be worth more or less depending on market conditions at the time it is listed. The combined firm would have about $2 billion in debt.

The two companies hope to close the deal this summer, people familiar with the matter said. The companies estimate their combined 2010 earnings would be around $875 million, including cost savings.

Under the plan, the Quadracci family, which owns Quad/Graphics, would control the combined company after it went public through ownership of class B shares, these people said. A substantial block of shares would also be owned by Quad/Graphics's employee stock ownership plan.

Quad/Graphics Chief Executive Joel Quadracci, 41 years old, would be CEO of the combined company. Mr. Quadracci's father Harry launched Quad/Graphics nearly four decades ago with a rented printing press in a millwork factory outside Milwaukee. Aside from printing, Quad/Graphics is known for its on-site health clinics. Today, a subsidiary, QuadMed, manages such clinics for other Milwaukee-area companies, such as Miller Brewing.

World Color's CEO, Mark Angelson, 58, is expected to be named to the board of the new company and oversee the integration of the companies, people familiar with the matter said. He is a former CEO of R.R. Donnelley, which has annual sales of around $10 billion.