Wisconsin-based Quad/Graphics has bought Courier, the nations second largest book manufacturer, in order to accelerate its three-year strategy to transform its book platform.
Under terms of the agreement, Quad/Graphics will acquire Courier in a transaction valued at approximately $260 million, including approximately $25 million in net debt and capital leases as of December 31, 2014. Quad/Graphics will pay Courier shareholders the equivalent of a total purchase price of $20.50 per share, consisting of cash and shares of Quad/Graphics Class A common stock.
Each Courier shareholder will have the right to elect to receive cash or Quad/Graphics common stock, subject to proration in the event that shareholders elect to receive more than 54% cash or more than 46% stock. Quad/Graphics will pay an aggregate amount consisting of approximately $129 million in cash and approximately 4.8 million shares.
Sussex-based Quad, the nation’s third-largest printer of ink-on-paper books, made the announcement only days after it unveiled a related three-year investment in 20 or more state-of-the-art, high-volume, high-speed color digital presses that do nothing but books — although in short print-on-demand runs, customized content and low inventories.
Quad aims “to transform its book platform,” the company said. The Courier acquisition and the new presses all are meant “to give publishers a full range of options for producing and delivering books on demand, bringing zero inventory and just-in-time delivery closer to reality,” Quad said.
The acquisition is valued at $260 million. Quad, however, declined to quantify the size of its investment in new digital presses.
Quad already ranks as the nation’s biggest printer of magazines and catalogs, producing titles such as Time and Rolling Stone and catalogs including L.L. Bean. It has been remaking itself through a rapid-fire succession of nine acquisitions since 2010. The nation’s biggest book printer remains Chicago-based R.R. Donnelley & Sons Co.
Quad, like Donnelley, operates printing presses for diverse purposes including direct mail and retail inserts. With its announcements over the last week, however, Quad signaled that it remains committed to the binding and printing of books.
“Quad manufactures nearly 1 billion books annually,” Quad boasts on its web page. For it’s part, Courier last year produced over 175 million books.
Courier produces a wide portfolio of publications in addition to its electronic media and e-book services. It has printed tens of millions of Bibles, which it began doing in 1937. It has a major textbook division. And all the rest are titles that browsers would buy online or find in regular bookstores, although the latter have become an endangered species.
“Using digital technology, Courier pioneered the development of customization solutions that now bring class-specific versions of academic textbooks to millions of students each year,” Quadracci said. “The company has continually reinvested in its platform, and with our previously announced investment in 20-plus digital presses and integrated systems, together we will accelerate a broad industry transition to a print-on-demand, zero-inventory model.”
Printing is a major industry in Wisconsin and the Midwest. In addition to nine facilities in its home state of Wisconsin, where Quad employs nearly 7,000, Quad also operates across North and South America with inroads in Europe and India.
Quad/Graphics, with annual revenue of about $4.8 billion, expects the Courier acquisition to close by midyear. At that time, James Conway III, Courier’s chairman and chief executive, will become head of Quad’s book division.
Traditionally, book publishers have had to carry large inventories, a significant portion of which may go unsold and become obsolete. “With this investment in digital presses and integrated systems we can support a broad industry transition to a print-on-demand, zero-inventory model,” said Joel Quadracci, Quad/Graphics Chairman, President & CEO.
“Our digital press solution will help redefine the entire book supply chain, giving publishers increased customization and versioning capabilities; faster time-to-market; reduced waste, inventories and obsolescence; and lower fixed costs. Accordingly, publishers will be able tofocus more on content and have the ability to redeploy the capital previously tied up in inventory to other initiatives.”
Quad/Graphics’ three-year strategy to transform its book platform is already underway. The Company will put into production five HP color digital web presses this year, the first of which it will begin installing this month. The other 15-plus presses will be installed in the remaining two-year period. Once all units are installed, Quad/Graphics will have the capacity to produce nearly 3 billion color pages each month.
“HP’s innovative technology supports our strategy to transform our book platform to help publishers bring printed content to market faster and more cost effectively,” said Quadracci, noting that the overall volume of digitally printed books are forecast to increase 15.2% annually through 2019 according to a recent digital book printing study by Interquest, a market and technology research firm. “Our digital printing transformation strategy will allow us to gain additional market share and grow this segment of our business.”
