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RR Donnelley Likely Exploring an LBO

September 2006
CHICAGO—Several media outlets are reporting that RR Donnelley has held talks with various leveraged buyout (LBO) firms.

The Wall Street Journal reported that one group consists of Carlyle Group, Madison Dearborn Partners and Thomas H. Lee Partners. Blackstone Group and Texas Pacific Group comprise the other, the WSJ said.

Taking Donnelley private could have a starting price of around $11 billion, an anonymous source told the Chicago Tribune.

Doug Fitzgerald, senior vice president of marketing for RR Donnelley, said the company had no comment on the LBO rumors.

Gimme Credit analyst Dave Novosel, in a recent report, believes the company lacks the kind of free-flow cash leveraged buyers look for to lower debt incurred in buyouts, nor does it have meaningful convertible assets to finance an LBO.

The Associated Press reported that Standard & Poor’s (S&P) Ratings Services—given the debt that could accrue in a LBO—may downgrade Donnelley’s credit ratings.

 

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