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EDITOR'S notebook

May 2005
Burton: A White Knight Or a Corporate Raider?

If television network executives were planning to cast a reality show for the graphic arts industry, Bob Burton would surely be on my short list. He's quickly becoming our industry's version of the likes of T. Boone Pickens and Carl Icahn who, during the 1980s, dominated the news with their attempts to rest control of underperforming companies and oust existing management they considered inept. On the heels of the failed proxy fight to take over Creo Inc. that Burton launched last year, the former chief executive of World Color and Moore Corp. is now exerting his financial muscle in an unsolicited bid for a second company.

His latest target is Englewood, CO-based Cenveo Inc. (formerly called Mail-Well), a roughly $1.7 billion industry consolidator that produces, among other products, commercial printing, envelopes, labels and business documents. Cenveo currently has approximately 10,000 employees and more than 80 production locations, as well as five dedicated fulfillment and distribution centers. Paul Reilly—one of the key architects in the formation of Cenveo—stepped down as chairman and CEO in January, and is serving in an interim role until a replacement can be found. If Burton has his way, it will be him.

But victory won't come easy for Burton. Cenveo's board of directors recently instituted a proverbial "poison pill" to thwart that effort. Perhaps the irony, in the fashion of the wealth racked up by those Wall Street mavericks of the '80s, is that Burton will most likely win either way. Despite his failed attempts to oust the existing management at Creo and have himself declared CEO, the $16.50 per share cash price that Eastman Kodak eventually paid for Creo conceivably netted Burton Capital Management and Toronto hedge fund Goodwood more than $61⁄2 million in profits on their investment of just under $7 million. Not a bad ROI, especially considering they didn't prevail.

The same scenario may very well hold true in his efforts to take over Cenveo. Burton and Goodwood now own 10.6 percent of Cenveo stock, which has skyrocketed following news of their latest hostile takeover attempt and an earlier offer to acquire the company made last July. Even if Burton doesn't ultimately ascend to the ivory tower at Cenveo, he will still most likely take home another big pay day.

The sad part of all of these financial wranglings, to me at least, is the potential for disconnect between what might be good for shareholders vs. the end game for Cenveo (and Creo) employees, as well as their customers. Sure, shareholders and investors are delighted with the notion that a "white knight" like Burton can come into a company like Cenveo and aggressively cut costs, sell off pieces, if necessary, and increase shareholder value. And it can be argued that he would ride in, shake things up and make many tough business decisions that might be inevitable anyway. But getting there also means the displacement of loyal employees, plant closures and understandable feelings of uncertainty among Cenveo's customer base.

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