R.R. Donnelley to Buy Perry Judd’s

In a move that surprised some industry watchers, printer R.R. Donnelley & Sons announced on Dec. 20 that it has agreed to acquire fellow printer Perry Judd’s Holdings for $176 million. The all-cash deal is expected to close in the first quarter of 2007. Waterloo, WI-based Perry Judd’s, a privately owned printer of magazines and catalogs, recorded approximately $260 million in sales in 2005.

This marks Chicago-based Donnelley’s second acquisition of a printing company in less than two months. On Oct. 31, the $8.43 billion Donnelley agreed to acquire one of its major competitors in the world of catalog printing, Menasha, WI-based Banta Corp., for about $1.3 billion.

According to Donnelley’s agreement with Perry Judd’s, $47 million of the purchase price is for the company’s common stock and the remainder is for the purchase of the company’s preferred stock and the assumption of debt. Donnelley, North America’s largest printer, expects to repay the debt at or just after the closing.

“Increasing our flexibility with the addition of Perry Judd’s respected capabilities will allow us better to serve both organizations’ customers,” Donnelley CEO Mark Angelson said in a statement, “and will create immediate cross-selling synergies as we leverage our leading premedia, logistics, direct mail, and other production and service resources.”

Donnelley’s services include document-based business process outsourcing; print fulfillment; logistics; contact centers; print management; online services; digital photography; color services; and content and database management.

Michael Wade, director of sales and marketing at Deerfield, IL-based distributor Wade Paper Corp., says the acquisition comes as “somewhat of a surprise but seems to be in line with [Donnelley’s] platform. It will be interesting to see if they are still looking at other assets to acquire or if this will be it for a while.”

When Donnelley acquired Banta, David Goldschmidt, vice president of sales for Newport, CA-based paper brokerage Strategic Paper Group, made a prediction: “We can certainly expect further consolidation in both the printing and paper industries over the next couple of years.” Even so, he too says the Perry Judd’s acquisition was “a bit of a surprise. I expected more mergers and acquisitions, but this was sooner than expected.”

Looking ahead, Goldschmidt says, “It will be interesting to watch how the assets are managed. We will see some capacity taken out of the system, which will tighten things up a bit. From Donnelley’s vantage point, it will offer economies of scale in many areas. Duplication for the end user might be a negative, as less capacity could potentially translate into rising prices and less press-time availability. Duplication will certainly lead to layoffs.”

John Maine, vice president of the Bedford, MA-based forest industry research group RISI, offered a perspective from the paper side: Donnelley “will move from a large buyer of paper to a gigantic buyer of paper, so they may have negotiating power on prices.”

In 2003, Perry Judd’s sustained a significant setback when it lost its Time Inc. business, which represented about 12% of its overall revenue. As a result, the company shut its Waterloo Printing Division, cutting about 550 jobs. The 75-year-old company produces catalogs and magazines in three facilities (Baraboo, WI; Spencer, IA; and Strasburg, VA) and maintains a central prepress facility in Madison, WI, that serves all three printing sites.

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