RR Donnelley Eyes Bankrupt Quebecor World
The deal calls for $957 million in cash and 30 million shares of Donnelley's common stock, worth another $394 million, based on its value as of closing value on May 12. The transaction, expected to add to RRD's earnings within 12 months of the combined operations, is not subject to any financing condition and no shareholder approval is required.
"Our offer would significantly enhance our ability to provide customers more comprehensive end-to-end printing solutions, expand our geographic reach into the important Canadian market and better balance our capacity with customer demand—all while achieving significant immediate and long-lasting synergies," said Tom Quinlan, president and CEO of RR Donnelley, in a release.
"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.