Vertis and American Color to Merge, Finally

Marketing services provider Vertis Communications on July 15 announced plans to begin voluntary proceedings under Chapter 11 of the U.S. Bankruptcy Code. This paves the way for a previously announced merger with American Color Graphics.

American Color Graphics also commenced voluntary Chapter 11 proceedings and filed its own prepackaged plan. Vertis Communications and American Color Graphics are two of the largest printing and premedia companies in North America. Vertis has obtained $380 million in debtor-in-possession financing from GE Commercial Finance. This money will provide the company with sufficient liquidity until the prepackaged plan is consummated.

Baltimore-based Vertis also has commitments for $650 million in exit financing, which will become effective upon consummation of the prepackaged plan and fund the combined company’s working capital needs.

Mike DuBose, chairman/CEO of Vertis Communications says that the merger, originally announced in July 2007, will be completed by late summer. Why the long delay?

The two companies’ management teams and creditors could not agree on a deal last year, so the merger was not consummated at that time,” he says. But the synergies of the two companies “are undeniable,” he says, “and we began actively pursuing the merger again in the spring.”

DuBose says American Color Graphics conducts a modest amount of catalog production and distribution at several of its print facilities, as well as offering premedia and workflow services applicable to catalogers. The merger will integrate American Color’s eight offset and flexographic print facilities, one total market coverage facility, six premedia facilities, and several managed service sites into Vertis Communications.

“The combination of these operations and capabilities with Vertis Communications’ 17 advertising insert production facilities, world-class premedia, direct marketing, media placement, technology, and creative services will offer clients benefits, including enhanced solutions and production capacity,” he says.

What prompted the Chapter 11 filing by Vertis? “Because both American Color Graphics and Vertis Communications have high interest payments and heavy debt burdens, we are effectuating the merger through comprehensive financial restructuring plans,” DuBose explains. “Both companies are filing voluntary “prepackaged” Chapter 11 plans of reorganization.”

This is very different from other companies who proceeded with a “traditional” Chapter 11, he notes. “We are in much better shape because our creditors have voted on the plan before we filed. Since we already have the votes in place necessary to confirm the plan, we will conclude our financial restructuring and complete our merger in just a few months.

Also through the “prepackaged” reorganization, DuBose says, “the plan calls for trade creditors, suppliers, and employees to continue working with and being paid by Vertis as normal.”

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