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RR Donnelley Eyes Bankrupt Quebecor World

June 2009

"We look forward to the chance to work with the debtors as they develop the plan that they feel is in the best interests of their stakeholders."

Quebecor World is operating under Chapter 11 reorganizational bankruptcy rules in the United States and the Companies' Creditors Arrangement Act in Canada. It had expected to emerge from bankruptcy protection in July, though creditors could pressure the company and the bankruptcy judge to accept Donnelley's offer.

"Creditors are likely to get their money much sooner if they go with the Donnelley offer," DeWese notes. "The offer is a little less than 25 percent of sales. That's not a lot of money to pay for sales. Nowadays, companies go for 50 percent of sales, and I've seen years when it's been 75 percent."

In his letter to Quebecor World, Quinlan said he believes the $1.35 billion offer is superior to the restructuring proposal set forth in the First Amended Plan of Reorganization. In that letter, Quinlan also revealed that Donnelley had made an offer to purchase the company in August 2008, but did not receive a response.

As of December 31, 2008, RRD had just $331 million in cash on hand and $3.2 billion in long-term debt, plus $1.2 billion in other long-term liabilities. It saw its first quarter net profits plunge 92 percent year-over-year.

Such a combination of printing conglomerates would have two notable impacts. It would provide Donnelley much stronger pricing power in its major footholds. But it would also trigger an integration bloodbath that would entail plant consolidations and layoffs of thousands of employees, with some placing estimates at 7,000 to 10,000 job cuts.


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