R.R. Donnelley to Buy Banta for $1.3 Billion

Nov 02, 2006 3:59 AM  By

Chicago-based R.R. Donnelley & Sons, the largest printer in North America, agreed on Oct. 31 to buy Menasha, WI-based printer Banta Corp. for $1.3 billion in cash. The deal is expected to close in the first quarter of 2007.

Earlier on Oct. 31, Stamford, CT-based Cenveo, which makes envelopes and provides digital printing services, withdrew its bid to acquire Banta for $1.21 billion.

“Banta is an exceptional fit with R.R. Donnelley,” Donnelley CEO Mark Angelson said during the company’s conference call on Nov.1. “This combination will create immediate cross-selling opportunities with our blue-chip customers as well as offer substantial synergies in our procurement, manufacturing, and services operations.

The merger, says Banta spokesperson Mark Fleming, will enable Donnelley to expand the range of products and services it offers customers, while at the same time enhancing its services to the magazine, catalog, book, and direct marketing segments. “Donnelley is more in the long-run printing solutions, while Banta does more short and medium runs,” he notes.

Banta, which has operations in Europe and Asia as well as in the U.S., will expand Donnelley’s geographic footprint and create opportunities for additional scale in locations where R.R. Donnelley is already present.

Banta, which has approximately 1,600 employees in Wisconsin and 8,000 worldwide, reported 2005 revenue of $1.54 billion and earnings of $95 million, or $3.65 per share. Donnelley has 47,000 employees worldwide and posted 2005 sales of $8.43 billion. Donnelley’s offer, equal to $52.50 per share, represents a premium of 18.6% over Banta’s closing share price Tuesday on the New York Stock Exchange of $44.28.

With the merger of two major players in the printing sector, catalogers may worry that the loss of a competitor could lead to higher prices. But the resulting efficiencies could possibly lead to lower prices, says John Maine, vice president of the Bedford, MA-based forest industry research group RISI.

“To the extent that the merger might improve efficiency and lower print production costs, it could benefit the magazine and catalog industry,” Maine says. “Synergies and efficiency gains with mergers can lead to both improved profitability for the printer as well as reduced cost for the publisher, as long as market shares don’t get so high as to impede competition.”

The merger should enable Donnelley “to improve overall efficiency and expand their capabilities in the catalog, magazine, and book segments,” agrees David Goldschmidt, vice president of sales and marketing, catalog division for Newport, CA-based paper brokerage Strategic Paper Group, “which should allow them to be more competitive and/or profitable in certain situations.”

Adds Goldschmidt: “One thing is for sure: We can certainly expect further consolidation in both the printing and paper industries over the next couple years.”