Quad/Graphics, a worldwide marketing solutions partner, has announced that Quad and LSC Communications (LSC) have mutually agreed to terminate their merger agreement pursuant to which Quad would have acquired LSC.
The US$1.4 billion all-stock transaction was announced on October 31, 2018, and was approved by shareholders of both companies on February 22, 2019. In June, the U.S. Department of Justice sued to block the acquisition, and this month, the U.S. District Court for the Northern District of Illinois set a litigation schedule that includes a trial that would start in mid-November at the earliest and that would not result in a decision on the merits until 2020.
The parties have determined that the added delay, uncertainty and cost of legal challenges would have likely eroded a considerable amount of the expected benefits of the merger. As required by the merger agreement, Quad will pay LSC a reverse termination fee of US$45 million.
“Quad’s commitment to our clients, shareholders and employees, and dedication to preserving a vibrant print option that can compete in the digital age, were driving forces behind this business combination and aligned with our long-term business strategy,” said Joel Quadracci, Quad Chairman, President and CEO. “We are disappointed by the Justice Department’s decision to sue to block the transaction and believe that the lawsuit does not reflect the dynamics of print today and the competitive effect of digital media. We believe this focus is in the best long-term interest of all our stakeholders.”
Quad says it continues to execute on its strategic priorities to enhance Adjusted EBITDA and generate Free Cash Flow to fuel its Quad 3.0 growth strategy. Over the past few years, Quad has made a series of strategic investments in a move to strengthen and expand its integrated marketing solutions offering, including acquiring marketing services firm Ivie & Associates and creative agency Periscope; acquiring a controlling ownership interest in digital agency Rise Interactive; and investing in senior client-side talent.
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