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.

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  • KHJ

    What is jaw-dropping are the salaries, raises, retention pay, bonuses and absurd legal fees incurred (multi millions) in the months before the filing (see SOFA 3 after pg. 684 and SOFA 9 How can any sane/ethical leader/ethical justify paying himself and his executive staff 2x’s their salary just to stay when they all knew the endgame? Additionally, how can he reward anyone on the executive team for performance? The company was going broke! It’s unfathomable how our court system can allow this behavior to continue. Hundreds of millions of dollars are owed to legitimate creditors, yet the "executives" and their lawyers are the ones who will (again) reap the windfall. To make matters worse, they have the gall to ask for an additional $4.3 million in order to reward 90 key employees for hitting revenue targets! ( Shameful on all accounts! The Judge should remove this team immediately a order repayment of all bonuses and retention pay.

  • Matt Wilson

    Mr. Michelson,

    I just finished reading your editorial on the Vertis bankruptcy and I simply wanted to applaud you for speaking up. The way I see it our bankruptcy laws do nothing to facilitate sanity in the market place but rather continue to concentrate both control and money in the hands of lawyers and large corporations. Your last sentence sums it all up perfectly.

    Thanks for speaking out.

    Matt Wilson

  • DLS

    It is a very strange life we have and a world we live in when the big boys can be paid the amount of money they are getting to drive a company in the ground so the investors can have their money and gains while those working to make the produce run are buried in the corner and will be kicked out the door when they lock the doors and say it is over go away. Most if not all will not recieve a Thanks or Job well done, just leave and feel lucky you had a job as long as yo did. HA!