The new Quad/Graphics will take its place at the top table of world print, part of the exclusive quartet that comprises rival US printer RR Donnolley, and the two Japanese giants Dainippon and Toppan.
The deal will give World Color shareholders a 40 per cent stake in Quad/Graphics, while Quad/Graphics shareholders take a 60 per cent stake in World Color
That Quad/Graphics is prepared to spend such a huge sum is seen by most analysts as a major confidence booster for the industry, as it battles to find its place n the new digital information era.
Quad/Graphics is the largest privately held printer in the US, while and World Color Press (Worldcolor) is the second largest provider of print, digital and related services in the Americas. Worldcolor was formed when Quebecor fell into bankruptcy last year.
RR Donnolley, the biggest printer in the States had itself been looking to buy Worldcolor, and was in advanced negotiations throughout the first half of last year, but the deal eventually fell through.
The expanded Quad/Graphics will have nearly 30,000 employees serving customers in the US, Canada, Latin America and Europe. Worldcolor and Quad/Graphics had aggregate unaudited revenues for the 12-month period ended September 30, 2009 of US$5.1bn and aggregate unaudited adjusted EBITDA of US$647m. Worldcolor’s and Quad/Graphics’ unaudited adjusted EBITDA margins for the same period were 9.7 per cent and 17.6 per cent, respectively.
Joel Quadracci Quad/Graphics chairman, president and chief executive officer will serve in the same capacity in the expanded company. The future board will be comprised of the six current Quad/Graphics directors and two Worldcolor directors: Mark Angelson, Worldcolor chairman and chief executive, and a director to be named.
The transaction is expected to close approximately in the summer of 2010 and be accreted to the earnings of the combined enterprise. Quad/Graphics’ management estimates that the combination will generate approximately U.S$225m in pre-tax net annualised synergies within 24 months.
Concurrent with the closing of the transaction, Quad/Graphics intends to become a publicly traded company. Quad/Graphics expects to register its Class A Common shares with the US Securities and Exchange Commission (SEC) and proceed with a listing on a leading US exchange.
Under terms of the agreement, Worldcolor shareholders will receive at closing approximately 40 percent of the outstanding shares of Quad/Graphics and Quad/Graphics’ shareholders will hold approximately 60 percent of the shares.
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