Commentary & Analysis
What's Next for Quebecor World
By Adam Dewitz
Published: December 19, 2007
The Globe and Mail is reporting, "Printing giant R.R. Donnelley & Sons Co. and two U.S. private-equity funds - Kohlberg Kravis Roberts & Co. and Cerberus Capital Management LP - are among the firms circling troubled Quebecor World Inc."
Quebecor World Shares hit an all-time low in November after the company announced a 750 million dollar refinancing plan. The company withdrew the plan a week later citing "adverse current financial market conditions."
On December 12th, Quebecor World annouced that it's CEO Wes Lucas was leaving the company to "pursue other opportunities." He was replace by Jacques Mallette, Executive Vice-President and Chief Financial Officer of Quebecor World.
On December 13th Quebecor World
halted the sale of its European assets saying "it will not be proceeding with the sale of its European business to RSDB NV due to the lack of support of the transaction from RSDB's shareholders."
The Global and Mail cites another source that says Transcontinental Inc is interested in the company. Canada East
quotes Transcontinental CEO Luc Desjardin's comments from the companies fourth-quarter and 2007 results conference call, "We always look at evaluating all opportunities in North America, but only opportunities that enhance our niche strategy. We don't look at becoming the largest printer but the best in our niches." (Transcontinental just reported a lower fourth-quarter profit than expected citing the strong Canadian dollar and the U.S. mortgage market).
It will be interesting to see what the next move for Quebecor World will be. Will they sell? Can Mallette incite change within the companies management. Will Robert Burton swoop in and
save the day?
Adam Dewitz is CTO at WhatTheyThink. He has detailed knowledge of: Printing and Publishing Technology, Web-enabled Print Production, Software Development, Web Development, Information Systems, and has served in production and technology roles in printing companies.
Nice post. The timeline is especially useful.
Just my two cents, if it turns out that they are on the market and they get picked up by private capital instead of another printing company, it will be very interesting to watch what happens next.
A perspective from the ex-COO of Quebecor:
The gravure operations are the jewel in the crown here in the US. They are still anchored by the long-term contracts and have a technologically competitive production network. RRD should get the gravure operations in a scenario where the entire company is parted out in partnership with private equity. The offset operations for magazine and catalogs have been starved for capital for years and forced to compete on price in select niches with lackluster customer service. (despite the best efforts of some valiant employees). The M-3000 equipped locations should be sold-off to an offset leader and the balance shuttered with the possible exception of short-run magazine locations that might have a stable of contracts. The book plants should be sold to either the Sheridan Group or Jim Conway at Courier Inc - Courier has the management team to turn around those elements that can still be saved.
Mr. Fors,
What about the European organization?
Mr. Fors ... sell Quebecor book plants to The Sheridan Group?
Ahem! The Sheridan Group already has $165 million of private equity debt at 10.25% interest.
Sheridan posted an $8 million loss in 2006 due to the cooked books of its Dingley Press acquisition (which included "revenue recognition, asset valuation, derivative instruments and stock option accounting" issues).
Had a bookkeeper whistle blown Dingley's sauteed books before Sheridan reported them to the SEC, Dingley's previous owner would almost certainly be attending Sheridan Board meetings by telephone -- from jail! -- instead of in person.
Tragically, these debt-ridden private equity printing industry 'rollups' simply serve as vehicles for 'executive looting' at the expense of the worker bees within the acquired companies.
The CEO of The Sheridan Group paid himself over $1 million, in 2003, to manage his massive debt. Nobody in Sheridan management ever had anything to do with printing. They came from Noxell, the Noxema and Cover Girl makeup division of Procter & Gamble which is headquartered a mile up the road.
The Group's current management will retire wealthy, leaving the acquired companies saddled with huge debt.
Eventually the Sheridan Group will probably embarrass Champ Sheridan (who is a real printer) by being auctioned off by its frustrated NYC private equity owners -- who have already strongly incentived the CEO to find them a buyer so they can unload the company.
Quebecor, Sheridan, Cenveo, Printcafe ... these rollup debt disasters are the ego-driven "Field of Dreams" of wannabes who cruelly damage the printing industry.
End of Sermon.
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