Thursday, January 16, 2014

RR Donnelly & Sons’ acquisition of Consolidated Graphics clears antitrust hurdle; deal expected to close in Q1 2014

R. R. Donnelley & Sons Company and Consolidated Graphics, Inc. have jointly announced the expiration of the waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 ("HSR") in connection with the previously announced merger agreement under which RR Donnelley will acquire all of the outstanding common stock of Consolidated Graphics. The waiting period expired on Friday, December 13.
Expiration of the HSR waiting period satisfies one of the conditions to the closing of the proposed merger, which remains subject to approval by the shareholders of Consolidated Graphics and other customary closing conditions. The transaction is expected to close in the first quarter of 2014.

Link to blog post on October 24th about Donnelly’s acquisition of Consolidated Graphics:

Blog Publisher’s comments:

In the “Reprographics 101 Winding Down” post I put up on the blog the other day, I mentioned “consolidation” in the “printing” industry.  Donnelly’s acquisition of Consolidated Graphics is not just a  perfect example of printing industry consolidation, it is a very large deal within the context of the overall printing industry.  Two of the industry’s top ten firms combining forces.  Two arch competitors combining forces.  Why?  Well, the printing business is in decline (total printing industry revenues are shrinking), and that situation is not expected to change over the years to come.  In spite of the fact that the number of “documents” being created continues to expand exponentially, the number of documents actually being committed to “hard copy” print is in decline and, of the documents actually being committed to print, volumes (quantities) are in decline.  The consolidation of these two printing-industry giants represents a significant opportunity for the survivor, RR Donnelly & Sons, to benefit from economies of scale (reduce duplicative operations and expenses).  And, in my opinion, the consolidation of these two companies into one will have at least some effect on pricing power (since the deal will reduce competition).  Altogether, this should allow RR Donnelly & Sons to report improved gross margin and profits over time, but, if the printing industry continues to shrink, overall-revenue-wise, the effect on RR Donnelly’s bottom line may be short term (i.e., over the next few years) rather than long term (i.e., over the long-haul).  (Don’t be surprised if, in the future, you hear that Donnelly announces plans to cut plants and employees.)  To put this deal in perspective for “reprographers”, if ARC Document Solutions and Thomas Reprographics and NRI merged together, that combination would not be altogether different from the combination of Donnelly and Consolidation Graphics.  (Note:  I’m just giving you an example; I don’t foresee ARC and Thomas Repro and NRI ever getting together, but, having said that, someone reminded me to “never say never.”)

On a completely different note:  Consolidated Graphics’ sales are in excess of $1 billion annually, it is profitable, and its market cap is around $650 million.  Textura Corp, which has yet to earn a profit (and whose losses, to date, have been very significant compared to its annual revenues) reported annual revenues of less than $40 million in its last fiscal year, yet, despite that, Textura’s market cap is over $800 million.  Conclusion, turn your reprographics (or printing) business into a “cloud software” business so that you, too, can benefit, enterprise-value-wise, from hype and fluff.

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