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FINANCIAL PRINTING - A Bull Without Horns?

December 2000
The year 2000 brought a myriad of activity in the financial printing segment, from a slowing economy to a number of printer acquisitions.


BY CAROLINE MILLER


The end of 1999 will be recorded by many in the financial printing industry as one of the best years in modern history. However, the dawn of the new millennium found the financial printing market feeling the effects of a slowing economy. The year 2000 saw uncertain demand in capital markets activity, most noticeably the softening of IPO and mergers and acquisitions in the third quarter, leading to a significant slowdown in the number of deals brought to the market in the fourth quarter.





















Top 10 Financial Printers
 CompanySegment
Sales
(millions)
Total Sales
(millions)
1Bowne & Co.
New York
$777$1,010
2R.R. Donnelley & Sons
Chicago
$500$5,000
3Merrill Corp.
St. Paul, MN
$235$587
4Cunningham Graphics
Jersey City, NJ
$74$166
5Burrups Packard
Philadelphia
$30$60
6Applied Printing Technologies
Moonachie, NJ
$25$105
7Henry Wurst Inc.
North Kansas City, MO
$19$97
8Scott Printing
New Providence, NJ
$17$35(E)
9PGI Companies
Minnetonka, MN
$15$38
10MacNaughton Lithograph/
Command Web Offset
Secaucus, NJ
$14$140


Despite this downturn, Paul Masterton, president of R.R. Donnelley Financial, contends that 2000 was still an excellent year for Donnelley Financial, which holds the number two spot among the Top 10 financial printers with market segment sales of $500 million. "Our participation in a number of large M&As, such as the merger of AOL and Time Warner, has had a sustained and positive impact on our revenue base," says Masterton.

Donnelley also benefited from strong international markets, which continue to show great potential for long-term growth. "There was a resurgence of capital markets activity in Asia, with several large privatizations completed in 2000 and more expected in 2001.

"Donnelley's European capital markets business has tripled since 1997, doubling in 2000 alone, a result of the European drive toward privatization, pan-European offerings targeting retail distribution, increased M&A activity and the growth of online financial communications," reports Masterton.

Donnelley Financial was not alone in reporting some market softness toward the end of the fiscal year. Carl Crosetto, executive vice president at Bowne & Co., notes that Bowne's financial printing business experienced a slowdown as a result of fewer M&As and IPOs. Despite the slowing of the economy, however, Bowne continued to hold its number one rank with $777 million in segment sales.

"Our financial printing operations were impacted by the slowdown in domestic capital market activity that commenced in the middle of the second quarter and continued through the third quarter," adds Crosetto. "The impact of the slowdown was felt in the volume of M&A and IPO work. We continue to maintain our leading market share notwithstanding this slowdown, having participated in significant deals such as the Berkshire Hathaway acquisition of Shaw Industries, the Citigroup acquisition of Associates, and the Lucent and Nextel spinoffs."

While 2000 will not go down in history as one of the best years in the domestic financial printing segment, Crosetto reveals that Bowne's international financial printing remains strong.

"The continuing strength of our international financial printing business, and in the international capital markets, is evidenced by our participation in the acquisitions of both Voice Stream Wireless and Powertel Inc. by Deutsche Telekom of Germany, the acquisitions of Paine Webber by the Union Bank of Switzerland, Seagrams by Vivendi of France and the merger of Terra Networks of Spain with Lycos.

"These transactions are indicative of the continuing, cross-border M&A work that is driving the growth of our international business. We continue to serve the growing debt and equity market in Europe, having printed the IPOs for New Skies, Satellite and Head N.V., as well as the bond issues for the Republic of Italy and Teva Pharmaceutical of Israel," he explains.

"We are very encouraged by the strong third quarter in Asia where our Hong Kong office continues to operate at near maximum capacity on a number of large equity transactions, including China Mobile, the Asia Global Crossing IPO, as well as the restructuring of Guangdong Enterprises in China. Our Latin American operations also experienced strong business activity, handling significant transactions across the region including Groupo Televisa and Penmex," states Crosetto.

Bowne and Donnelley were not the only financial printers reporting a strong year in 2000, though.

Burrups entered the U.S. market through the purchase of Packard Press, followed by the acquisition of select assets of Global Financial Press. Burrups Packard is now ranked fifth with $30 million in the financial print market segment, which represents 50 percent of its business. Burrups Packard is the U.S.-based financial printing unit of London-based St. Ives plc and Burrups Ltd., which is Europe's largest printing group.

"We had a very busy first half in 2000, boosted by an extremely robust new issues market. The second half, although slightly flat in the transactional financial printing market, was reasonably good in other segments of our business and, accordingly, the year 2000 taken as a whole was very positive," contends Burrups Packard President Joseph Weiss.

Another major player, St. Paul, MN-based Merrill Corp., again garnered the third spot on the Top 10 financial list. Merrill reported segment sales of $235 million in its most recent fiscal year. Merrill saw an increase of some $33 million in segment sales over the previous fiscal year.

Also joining the list this year for the first time is Secaucus, NJ-based MacNaughton Lithograph/Command Web Offset, with $14 million in segment sales.

So what will 2001 bring for the financial printing segment? Many believe that the current election turmoil will play a part in whether 2001 will be a bull or bear market for financial printing. "We hope, once the presidential election is concluded and a new administration is in place, that the new issue market will once again restart," says Weiss.

Bowne's president of financial print, Duncan Varty, feels that the new financial disclosure rules from the SEC will also impact all printers' customers. "We believe that the new financial disclosure rules from the SEC will encourage our customers to explore new means of shareholder communications. We expect more public and soon-to-be public companies to supplement their current, print-based shareholder communications with digital, print-on-demand and the Web," he states.

While Donnelley's Paul Masterton is unable to predict how long into 2001 the current uncertainty and reduced transactional demand will continue, he is confident that, in the long term, economic prospects are very healthy. "We've been through market slowdowns before, and they have taught us how to effectively adjust to market slowdowns while maintaining our focus on delivering service excellence to our customers."
 

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