Vertis: Third Chapter 11 in Just Five Years –Michelson

Unlike the 1993 comedy film "Groundhog Day" where Bill Murray finds himself living the same day over and over again, workers at Vertis didn't see any humor in their employer's most recent Chapter 11 announcement on Oct. 10—coming on the heels of similar prepackaged bankruptcy filings in 2008 and 2010. This time around, though, it looks like North America's second largest printer, Quad/Graphics, will end up acquiring Vertis' assets with a stalking horse bid of $258.5 million. The transaction is expected to close early next year.

For Quad/Graphics, the bargain-basement acquisition of a $1.1 billion-in-sales company will bolster its market share—and remove a large competitor—in the retail advertising insert, direct marketing and in-store marketing arenas. And, once the deal is finalized, the integration process will begin, undoubtedly leading to the closure of some, if not several, of Vertis' 25 ad insert, newspaper product and direct marketing facilities. That will only intensify the headcount reduction, which had already been occurring as the company struggled, of what had been nearly 5,000 Vertis employees spread across the United States.

Aside from the impacted workers, several industry suppliers are also ending up with the short end of the stick as creditors of Vertis. Leading the list, Resolute Forest Products—which as AbitibiBowater emerged from its own Chapter 11 protection in 2010—is owed $19.4 million, followed by Sun Chemical at $18.6 million and Catalyst Paper at $5 million. Even Kodak, currently in Chapter 11 itself, is owed more than $900,000.

Nor will this asset acquisition be viewed as good news for the smaller, often regional, printing industry competitors of Vertis or Quad/Graphics. As typically privately held businesses, they will find it difficult to compete with the combined behemoth's global pricing and service bundling capabilities, as well as its economies of scale in terms of volume discount purchasing power for paper and other consumables.

I'm no bankruptcy lawyer or Wall Street banker, but it doesn't make sense that our legal system and bankruptcy laws can allow one company to reorganize and shed its commitments three times in five years. Unfortunately, each time, the current crop of senior execs in charge—with none of their life savings or years of sweat equity on the line—just float off into the sunset, golden parachutes held tightly in hand, while the rank-and-file workers and mid-level managers face job uncertainty. That's not the land of opportunity our American forefathers envisioned.

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