Mergers & Acquisitions

Heidelberg Chairman Bernhard Schreier responded to the collapse of merger talks between his company and manroland in an interview with Frankfurter Allgemeine Zeitung (Frankfrut General Newspaper) today.

When asked why the merger talks failed between the two companies, Scrheier did not answer the question directly, instead saying, " Let me put it this way, I was extremely surprised at the way the whole thing was reported in the media. In our ad hoc announcement on Friday, we confirmed that sales appear to be bottoming out at a quarterly level of around EUR 500 million, but we predict that it will take a little longer before there can be any talk of a recovery."

When asked again regarding the merger talks, Schreier was reluctant to acknowledge talks were even underway. "We have not been commenting on speculation and that will remain our policy," said Schreier.

He also expressed surprise at the reaction from the company's financial forecast last Friday. "We recorded a positive free cash flow in the second quarter, which means that our position for the year as a whole will be better than the previous year. If anyone feels this can be interpreted as an indication of new risks, I have no comment to make."

Schreier mentioned that Heidelberg were in talks with Koenig and Bauer, but only regarding possible manufacturing agreements.

When asked whether or not the company will be stepping up efforts to seek a new investor, Schreier said, "We never relaxed our efforts so there is no need to step up our activities in this area." He also said he was confident the crisis has bottomed out at sales of EUR500 million per quarter and annual sales will return to EUR 3 billion.

Despite having made no official statement that merger talks were in progress, Reuters has revealed that manroland has called off the much-rumoured merger talks with Heidelberg, due to "poor financial results" of its larger rival.

The report cites it has consulted with three sources familiar with the matter. It also revealed that a merger in the future was not out of the question, but it would lie beyond 2010.

Heidelberg made a financial announcement on Friday saying it expects its net results for 2009 to be far below that of the previous year. The company will release its final numbers on November 10. Heidelberg's stock took a steep dive at the report on Monday, losing over 20 percent of its value.

According to Reuters, "Heidelberg's profit warning came just days before manroland and Heidelberg were to formally agree to proceed with merger talks."


Read the Reuters report here.

Thad McIlroyPublishing pundit Thad McIlroy has produced a major report on Adobe’s planned US$1.8 billion purchase of Web-analytics firm Omniture, announced on September 15. This marks the first report to be produced by, which McIlroy founded to monitor and analyze the strategic directions of digital publishing.

The report, which is to be made available on October 12, 2009, is designed to capture “the big picture of this deal and its even larger implications", which includes a detailed look at the adoption of Web-based analytics, as well as the strategies of tightly integrating marketing-and-design functions together – “and the potentially troubling increased threat to privacy on the Web.” The report also includes interviews with customers as well as Adobe and Omniture executives.

"I feel confident that The Future of Publishing team has got a fix on the upside of the deal. At the same time we've analyzed the possible negative implications and these are fully discussed in the report,” said McIlroy. "After weeks of debate and speculation, this report will fill in the blanks. How likely is it that the deal will deliver on the benefits promised by the two firms? What are the financial implications for each? What does it presage for the future of digital media?”

The report can be purchased this week, as a PDF download, for $75, while it will be $95 on October 12.

View report details or purchase.

Heidelberg CEOThe Frankfurt branch of Reuters reports that Heidelberger Druckmaschinen AG and manroland AG “are set to decide by mid-October whether to proceed with formal merger talks,” according to unnamed sources “familiar with the matter.”

While the Reuters report does not claim a merger is eminent, it does indicate that Heidelberg and manroland executives, and their banking representatives, are involved in serious discussions about melding the two German press makers.

As of yet, no executive from either Heidelberg or manroland has gone on record about the possibility of the merger. At Heidelberg’s PRINT 09 press conference, in Chicago on September 11, CEO Bernard Schreier said, “I do not comment on rumours,” which was a sentiment shared by Vince Lapinski, CEO of manroland North America.

Reuters’ sources suggest Allianz Capital Partners, the investment arm of insurer Allianz, is the driving force behind the merger talks. Allianz has a 65-percent interest in manroland and a 12-percent interest in Heidelberg. One source said, “The government does not at all want state aid [for Heidelberg] to be seen as aid for Allianz.”

The possibility of a merger between Heidelberg and manroland first appeared in mid-2009, when most printing-industry Websites cited various sources within Germany – most focusing on reports from German-based and the financial newsletter The Platow Brief. In late August, reported that negotiations were underway between Heidelberg’s Merrill Lynch representation and manroland’s Deutsche Bank – with Boston Consulting examining operational issues.

The new Heidelberg-manroland merger reporting, from Reuter’s Philipp Halstrick and Alexander Huebner, quotes one source as suggesting, "There are still a few issues to clear up."

Relative to Canada’s Federal government, Germany traditionally takes more interest in massive domestic business transactions. In addition to the thousands of employees and millions of dollars that both Heidelberg and manroland infuse into the German economy, any such merger would also need to address the €1.4 billion loan Heidelberg received – through various Federal- and State-level initiatives – in August 2009. The governmental loans fall due in mid-2012.

Details of Heidelberg’s €1.4 billion loan

• €300 million loan from the Special Program of the KfW (Reconstruction Loan Corporation) for large companies (with a 50 percent indemnity from the KfW to the banks);

• A €550 million loan supported by 90 percent guarantee pledges from the Federal Government and the States of Baden-Württemberg and Brandenburg; and

• A syndicated credit line from a consortium of banks, also for €550 million.

Xerox Corp. signed an agreement to acquire Affiliated Computer Services (ACS) in a cash and stock transaction valued at $63.11 per share or US$6.4 billion, as of the closing price of Xerox stock on September 25.

Headquartered in Dallas, ACS is described as the world's largest business process outsourcing (BPO) firm. It employs more than 74,000 people, working with multinational corporations and government agencies in over 100 countries from 500 locations. The transaction, which has been approved by the Xerox and ACS boards, is expected to close in the first quarter of 2010.

"By combining Xerox's strengths in document technology with ACS's expertise in managing and automating work processes, we're creating a new class of solution provider," said Ursula Burns, Xerox CEO, who described the deal as a “game-changer” for the company. "Xerox becomes a US$22 billion global company, of which US$17 billion is recurring revenue – a significant boost to our profitable annuity stream. The revenue we generate from services will triple from US$3.5 billion in 2008 to an estimated US$10 billion next year." 

In addition to the exchange of shares, Xerox will assume ACS's debt of US$2 billion and issue US$300 million of convertible preferred stock to ACS's Class B shareholders. On an adjusted earnings basis, Xerox expects the transaction to be accretive in the first year.

Cenveo Inc., led by Chairman and CEO Robert Burton out of Stanford, CT, today completed its previously announced acquisition of New Hampshire-based Nashua Corporation, which focuses on the development of materials for the label and specialty-paper markets.

Together, the new company is said to be one of the United States’ largest manufacturers of pharmaceutical, scale and shelf labels, while the new assets also allow Cenveo to enter deeper into point-of-sale and wide-format printing markets.

Under the terms of acquisition, each share of common stock of Nashua will be converted into (i) $0.75 per share in cash and (ii) 1.265 shares of Cenveo common stock.

Increasing its interests in online-based advertising, Adobe Systems Inc. signed an agreement to purchase an analytics company, called Omniture Inc., for US$1.8 billion. The systems of Omniture track the performance of Websites and online advertising campaigns.

Adobe agreed to pay $21.50 a share for Omniture, which Bloomberg news reports to be 24 percent more than the closing price yesterday. A company statement explains, “Adobe’s acquisition of Omniture furthers its mission to revolutionize the way the world engages with ideas and information.”

In addition to its online measurement systems, Omniture also focuses on strategies and technologies to optimize the backend efficiency of Web-based communications.

Adobe also announced its third quarter financial results which saw the company's profit fall 29 percent.  In the third quarter of fiscal 2009, Adobe achieved revenue of $697.5 million, compared to $887.3 million reported for the third quarter of fiscal 2008 and $704.7 million reported in the second quarter of fiscal 2009.


As AbitibiBowater continues to operate under bankruptcy protection, the Montreal-based company has sold approximately 121,000 hectares of private timberlands in Quebec for $53 million in cash.

Timberlands located in the Mauricie, Charlevoix and Saguenay regions were sold to two newly formed limited partnerships held by Société de gestion d'actifs forestiers Solifor, s.e.c. Timberlands located in the Côte-Nord region were sold to Aménagements forestiers Portneuf.

AbitibiBowater is primarily focused on the production of newsprint but also manufacturers commercial printing papers, market pulp and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world, with 23 pulp and paper facilities and 29 wood products facilities located in the United States, Canada, the United Kingdom and South Korea.

Bruce Bond, President of Unisource Canada, announced that the deal to acquire Mondrian Hall Inc. has been completed, after the national supplies distributor and another company, EM Plastics & Electric Products, submitted competing bids and both signed purchase agreements.

In mid-August, Unisource Canada resubmitted a bid to RSM Ritcher, which was assigned to look after Mondrian's assets under Companies' Creditors Arrangement Act protection, as EM Plastics' agreement was taken off the table.

With the Mondrian assets now secrured, Unisource Canada will expand its presence in the wide-format and sign printing markets. The company states Mondrian Hall will operate as a division of Unisource Canada.

The rumour concerning a possible merger between Heidelberg and manroland arose again after a report from Manager Magazin, a German publication, says the two companies have appointed Merrill Lynch and Deutsche Bank respectively to advise on the potential merger.

According to the report, the resulting merger would cause an overcapacity for the new company. The magazine suggests it may result in manroland selling, if not closing, its Offenbach operations and cutting the 2,500 people employed there.

Click here to read a translation of the Manager Magazin article.

U.K. publication PrintWeek also found discovered that German print magazine Deutscher Drucker is claiming manroland shareholder Allianz is in discussions with Chinese manufacturer Shanghai Electric on possibly selling parts of manroland's sheetfed business.

According to Bloomberg, Heidelberger Druckmaschinen, the world's largest press manufacturer, may be in talks with manroland AG to merge the two companies.

The story stems from a report from the July 27th edition of Der Platow Brief, a Frankfurt-based financial newsletter. According to the newsletter, Allianz SE, which has a controlling interest in manroland and a 12 percent stake in Heidelberg, is pressuring the two companies to merge to protect its investments.

The Platow Brief does not cite any sources and neither company would comment on the rumour.

manroland AG was formed in 1979, but has roots in webfed technology going back to 1845. Heidelberg was founded in 1850 and controls 40 percent of the sheetfed offset press marketplace today.

Read the full Bloomberg story

Shortly after Unisource canceled its agreement to purchase Gould Paper Canada, xpedx Canada led by Mike Kearney steps in to purchase the paper distributor. xpedx Canada, a subsidiary of International Paper, on June 20 announced it had completed the acquisition of Vancouver-based Gould Paper Canada Ltd., a subsidiary of privately held Gould Paper Corporation, headquartered in New York City.

Gould Paper Canada, which employs approximately 65 people, and with distribution facilities in Vancouver, Calgary and Edmonton, will operate as part of xpedx Canada, a business of xpedx, International Paper’s distribution business and one of North America’s largest business-to-business distributors.

"This is an exciting opportunity for xpedx Canada to expand its market reach to three major western Canadian markets—Vancouver, Calgary and Edmonton," said Kearney, VP of xpedx Canada. "Gould Paper Canada has a strong reputation for providing great customer service."

Unisource Canada announced it had canceled a May 15 agreement to purchase Gould just two days after a new, June 14 agreement to purchase large-format equipment Mondrian-Hall.



Two days after announcing an agreement to buy Mondrian-Hall, which itself filed for bankruptcy protection on July 8 of this year, Unisource Canada has now canceled an earlier agreement to purchase Gould Paper.

Unisource explained its decision in a single-sentence statement made on July 16: "Unisource Canada Inc. has been unable to reach a conclusive agreement with respect to the acquisition of Gould Paper Canada Ltd. in a timely manner and, as a result, has decided not to pursue the acquistion further at this time."

The original agreement to purchase Gould was made in mid-May 2009. On July 14, Unisource announced its intentions to purchase national wide-format equipment distributor Mondrian-Hall, which is a deal it expects to close by mid-August. On July 8, Mondrian-Hall filed for bankruptcy protection under the Companies' Creditors Arrangement Act., through RSM Richter.

RRD Quebecor World

RR Donnelley & Sons Company states its proposal to acquire substantially all of the assets and assume certain liabilities of Quebecor World has expired.

"We are disappointed by the decision of Quebecor World to reject our June 8 proposal," said Thomas Quinlan III, President and CEO of RR Donnelley (RRD). "We believe that our proposal was undoubtedly in the best interests of creditors based on a comparison of the distributions under our proposal with the distributions under the proposed stand-alone plan of reorganization. We are particularly disappointed because of the efforts and concessions made by us to adapt our proposal in response to concerns that were communicated to us."

RRD’s original May 12, US$1.3 billion proposal to Quebecor World was soon followed with modified versions. RRD states these June 2 and June 8 modifications – amounting to about US$200 million in cash and stock – were based on “preliminary due diligence” and to respond to feedback from certain Quebecor World creditors.

"This would have been an excellent fit for RR Donnelley and the best opportunity for the Quebecor World creditors. However, given our view of the Quebecor World operations, a transaction ascribing a higher value to Quebecor World than we offered in our last proposal is simply not in the interests of RR Donnelley," said Quinlan. "We look forward to continuing to pursue other strategic initiatives."

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