Will Facebook's "Paper" Replace the Morning Newspaper? – January 2014 M&A Activity
The business of distributing paper is also set to complete another round of consolidation. Not too long ago, paper distributors were mostly family-owned and managed enterprises. Many of those formerly independent companies were rolled up into two competing mega-distributors, Xpedx (owned by International Paper) and Unisource (owned by Bain Capital and Georgia-Pacific). Through a series of maneuvers, Xpedx will be spun off, and then Unisource will be merged into the new entity. Although margins are paper-thin for these distribution giants, the combined entity will reportedly be able to easily handle payments on the debt planned for the new enterprise. Xpedx is projecting combined revenues for the new company in the $9 billion to $10 billion range. With reasonable debt levels, and additional product offerings that may offset the trend of declining demand for printing papers, such as wide format and digital supplies, it appears that the new company will have enough buoyancy to stay afloat.
Gould Paper, another significant player in the US paper distribution market, with $1 billion in annual sales, also got into the roll-up action in January and announced that it has acquired Texas paper distributor Bosworth Papers. Gould in turn is 51% owned by the Japan Pulp & Paper company, a global paper distributor with $6 billion in annual revenues.
There also was activity in the other “paper business” – publishing newspapers. An unnamed “independent investor group” acquired Mainstreet Communications from PE fund Brookside Group, including a cluster of local newspaper in the Sierra Nevada area of California. This follows Brookside’s sale of eight community newspaper titles to the San Diego Union Tribune, as previously reported in our November 2013 deal log. In upstate New York, the president and CEO of The Scotsman Press announced that he was acquiring the company which publishes several local community newspapers.