LINCOLNSHIRE, Ill.-Nov 3, 2006--ACCO Brands Corporation has completed its plans for merging the full ACCO and General Binding Corporation businesses, resulting in:
* Realignment of its business and reporting segments for 2007
* Reaffirmation of achievement of original annual synergy target of $40 million by 2008
* Increased annual synergy targets by $20 million, to $60 million by 2009
* Reaffirmation of target exit rate operating income margin before restructuring and related non-recurring expenses of 11% by the end of 2008
The changes announced today will result in four clearly focused segments, which will be effective January 1, 2007. The company will create a Document Finishing Group by combining document communications activities from three of its current business segments. The company believes that a collaborative focus on new product development across all binding and laminating product lines will drive higher margins and growth through increased innovation that can be leveraged across all channels.
A separate Commercial Laminating Solutions Group will be created from the Commercial – Industrial and Print Finishing Group. The newly formed Commercial Laminating Solutions Group will focus on accelerating the development of products and applications for the commercial printing and packaging markets together with the innovative digital print market, which includes large format and on-demand printing.
“As separate global businesses, we expect our Document Finishing and Commercial Laminating Solutions groups will have improved top-line and operating margin growth potential over the longer term,” said David D. Campbell, chairman and chief executive officer. “We also believe that, with appropriate investment in new product development, the Document Finishing Group will become an engine for growth, as we see this as an area that has suffered from a lack of historical investment.
“A comprehensive strategic review of the GBC commercial businesses had been planned since prior to the August, 2005 merger,” Campbell continued. “GBC’s commercial business was kept separate and apart until the company could focus resources and pursue a systematic and thorough approach to fully understanding these business segments.
“The review identified two very attractive businesses, a Document Finishing Group and a Commercial Laminating Solutions Group,” he added. “The legacy structure of GBC co-mingled the two businesses, diluting focus, investment, and resources.”
Campbell noted that both businesses have clear objectives and priorities. “In Document Finishing, an absence of innovation has created an opportunity to meet growing consumer needs to simplify and easily bind color documents generated by significant growth in color printing and photocopying,” he said. “We are recruiting a leader for this business, and we intend to invest in world-class product development capabilities.
“We plan to grow the Commercial Laminating Solutions business through supply chain rationalization, accelerated investment in product development, and further investment in sales and marketing initiatives,” Campbell said. “Our laminating films business has been a leader in the development of new and innovative films and machines for the publishing, packaging, and large-format digital print markets. We believe this realignment will allow the business to better focus and extend these activities.”
“This new business segmentation provides greater clarity around product strategy and focused investment,” Campbell continued. “The new segmentation has clear lines of demarcation, clearly separating dissimilar products and focusing the businesses on like product categories. Our new business model will be global in nature and designed to leverage key shared services across all of our business segments where practical.”
When combined with the integration of its office products business, the GBC merger should now yield annual cost synergies of $60 million by the end of 2009. This is a $20 million increase from the company’s initial forecast of $40 million in annual savings, which the company still plans to achieve by the end of 2008. The additional synergies will result from supply chain enhancements, as well as greater leverage of the company’s shared services model, which will be extended to incorporate parts of the former GBC commercial operations. To achieve the increased synergies, the company will spend approximately a further $40 million in one-time pre-tax cash restructuring.
The Document Finishing Group will be a global business unit, reporting to Campbell. Its pro forma revenues in 2005 would have been approximately $550 million. The business will be composed primarily of the company’s binding product lines currently a part of the Other Commercial and Commercial – Industrial and Print Finishing segments, as well as the document communications consumer category currently a part of the Office Products Group, which includes both consumer binding and laminating equipment and consumables. The company’s shredding products and the Day-Timers business unit will continue to be reported as a part of the new segment.
The Office Products Group, with 2005 pro forma revenue of approximately $1 billion in its new configuration, will now focus on three consumer categories: Workspace Tools, Visual Communication and Storage and Organization. The Commercial Laminating Solutions Group would have reported 2005 pro forma revenue of approximately $170 million. The Kensington Computer Products Group, with 2005 revenue of $209 million, is unaffected by this realignment.
The company expects to provide restated historical pro forma financial information reflecting the revised business structure in mid-March 2007, after it completes its Form 10-K filing (which will be based on current reporting segments).
The company today also reaffirmed its expectation that it will achieve a target exit rate operating income margin before restructuring and related non-recurring expenses of 11% by the end of 2008.
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