Quad/Graphics to Acquire Worldcolor
Press Release—SUSSEX, WISCONSINand MONTREAL, QUEBEC, January 26, 2010–Quad/Graphics, Inc., the largest privately held printer in the U.S., and World Color Press Inc. (TSX: WC, WC.U) (“Worldcolor”), the second largest provider of print, digital and related services in the Americas, today announced that their boards of directors unanimously have approved a definitive arrangement agreement whereby Quad/Graphics will acquire Worldcolor, enhancing Quad/Graphics’ position as a leader in the printing industry with increased efficiencies, greater geographic reach and broader product and service scope. The expanded Quad/Graphics will have nearly 30,000 employees serving customers in the U.S., Canada, Latin America and
Europe. Worldcolor and Quad/Graphics had aggregate unaudited revenues for the 12-month
period ended September 30, 2009 of U.S. $5.1 billion and aggregate unaudited adjusted
EBITDAofU.S. $647 million. Worldcolor’s and Quad/Graphics’ unaudited adjusted EBITDA
margins for the same period were 9.7% and 17.6%, respectively.
The transaction is expected to close approximately in the summer of 2010 and be accretive to
the earnings of the combined enterprise. Quad/Graphics’ management estimates that the
combination will generate approximately U.S. $225 million in pre-tax net annualized synergies
within 24 months. Concurrent with the closing of the transaction, Quad/Graphics intends to
becomea publicly traded company. Quad/Graphics expects to register its Class A Common
shares with the U.S. Securities and Exchange Commission (SEC) and proceed with a listing on
a leading U.S. exchange. Under terms of the agreement, Worldcolor shareholders will receive
at closing approximately 40 percent of the outstanding shares of Quad/Graphics and
Quad/Graphics’ shareholders will hold approximately 60 percent of the shares.
The acquisition will enhance Quad/Graphics position as a commercial printing leader in North
America serving the Magazine, Catalog, Retail Insert, Book, Directory, and Direct Mail
product segments and enhance Quad/Graphics’ standing as one of the leading commercial
printers in the world. The expanded Quad/Graphics will be better positioned to succeed in the
dynamic, highly fragmented, and competitive printing industry as it will offer clients a more
comprehensive range of services, including a broader variety of product types and revenue
generating solutions; an enhanced manufacturing platform that will make available
Quad/Graphics’ industry leading technology and automation to the combined platform; an
expanded geographic footprint and customer service presence; and new opportunities to realize
distribution efficiencies throughimproved speed-to-market and product integrity for USPS
delivered products and volume driven postage savings programs, such as co-mailing, all backed
by experienced and proven leadership.
"By combining the strengths of both companies, we will enhanceour leadership position in the
printing industry,” said Joel Quadracci, Quad/Graphics Chairman, President and Chief
Executive Officer. “Customer needs and demands are rapidly evolving, and our expanded
company will be even better equipped to meet those demands. With increased access to capital
markets, we plan to make appropriate investments in our platform and data-driven solutions to
secure the future of print. With our strong commitment to innovation and customer
satisfaction, combined with the greater operational efficiencies we are targeting, we will be
better able to achieve our strategic objectives and continue to generate industry-leading
margins and profitable growth, all while creating opportunities for our customers, shareholders
“This transaction presents compelling opportunities for the achievement of synergies and other
efficiencies,” said Mark Angelson, Worldcolor Chairman and Chief Executive Officer.
“Quad/Graphics has a long tradition of leadership and operational excellence. I have the
highest regard for Joel and his management team, whom I consider to be among the best and
brightest executives anywhere. They have built a company known for having the industry’s
best technology, automation and robotics, and world-class customer service. Quad/Graphics
will make a fine, stable home for Worldcolor managers and employees. I look forward to
joining the Quad/Graphics Board and sharing our experience as we combine these storied
companies while ensuring that we focus on maximizing shareholder value and creating
opportunities for customers and employees well into the future.”
Added Mr. Quadracci: “Through our comprehensive due diligence, we learned Worldcolor has
very talented and professional employees who have performed well in challenging and
turbulent times. We look forward to having Worldcolor employees join and strengthen our
industry-leading team. In addition, this transaction allows us to expand our geographic scope
by entering the Canadian marketplace and certain Latin American markets where we currently
do not have a presence.”
“Mark Angelson has a long tenure in public company management and an unmatched record of
success in leading consolidations in our industryand creating value for public company
shareholders. I am pleased that he will join our Board and that we will benefit from his
experience as we integrate these two companies,” concluded Mr. Quadracci.
Through the acquisition, Quad/Graphics plans to achieve greater operational efficiencies,
capacity rationalization, enhanced production flexibility and reduced cycle time, and
significantly improve its supply chain management capabilities. Additionally, Quad/Graphics
expects to benefit from a strong pro forma credit profile with enhanced liquidity and generate
solid free cash flow.
Mr. Quadracci will serve as Chairman, President and Chief Executive Officer of the expanded
company. The future Board will be comprised of the six current Quad/Graphics directors and
two Worldcolor directors: Mr. Angelson, who will Chair the Board Committee on Integration
and Consolidation, and a director to be named prior to closing, who will becomea member of
the Audit Committee, bolstering Quad/Graphics’ commitment to excellence in financial
Each Worldcolor Common Share outstanding at closing will be converted after a multi-step
transaction into a number of Class A Common Shares of Quad/Graphics at a Share Exchange
Ratio to be determinedat closing. Worldcolor has Convertible Preferred Shares (and related
accrued but unpaid dividends) that at the option of each holder, may be converted into
Worldcolor Common Shares or, if not previously converted, will be redeemed forcash at U.S.
$8.00 per share. Worldcolor has two series of Warrants outstanding that either convert to
Worldcolor Common Shares or will be redeemed for cash at a price in accordance with
contractually specified formulas.
Worldcolor Common Shareholders will receive Quad/Graphics Class A Common Shares, each
having one vote per share, for approximately 40 percent total ownership of the Company.
Quad/Graphics’ shareholders will continue to own Class A, Class B and Class C shares for
approximately 60 percent total ownership of the Company. The Harry V. Quadracci family
will control the Company through ownership of the high-voting Class B shares. The Class C
Shares are owned by a qualified retirement trust for Quad/Graphics employees. Any future
dividend or consideration received will be distributed pro rata regardless of share class. The
Class A Common Shares are expected to afford holders enhanced liquidity. Neither the Class
B norClass C Shares are expected to be publicly traded.
Simultaneously with the closing, U.S. $140.0 million will be distributed in cash to
Quad/Graphics’ existing Common Shareholders. Quad/Graphics will also provide at least U.S.
$93.3 million to Worldcolor to purchase any Warrants not converted to Common Shares and to
fund redemptions of or payments due on any other equity securities not converted to Common
Shares. If less than $93.3 million is needed to make such purchases and redemptions, the
remainder will be distributed to Worldcolor Common Shareholders in cash.
The closing of the transaction is not contingent on financing. There is U.S. $1.2 billion of
committed financing from JPMorgan Chase and U.S. Bank to fund cash distributions, refinance
Quad/Graphics’ existing revolving credit facility, refinance Worldcolor’s existing debt
outstanding, fund expenses incurred in connection withthe transaction and fund repayment of
certain other Worldcolor obligations. As of September 30, 2009, the two companies had a
combined unaudited debt balance of approximately U.S. $1.7billion.
Completion of the acquisitionis subject to Quad/Graphics and Worldcolor shareholder and
regulatoryapprovals, including approval under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, the Canadian Competition Act and the Investment Canada Act. The transactionis
also subject to the approval of the Superior Court of Quebec, Commercial Division.
Shareholders of Quad/Graphics holding Quad/Graphics Common Shares having more than fifty
percent of the voting rights in Quad/Graphics have entered into a voting agreement in support
ofthe proposed transaction. The acquisition also is contingent on the SEC declaring effective
Quad/Graphics’ planned S-4/ProxyCircular filing.
Quad/Graphics and Worldcolor each have agreed not to solicit other offers, but may consider
superior proposals from third parties in certain circumstances, subject to the match rights of the
other party. The arrangement agreement also provides for the payment of a U.S. $40 million
break-up fee to either party if the transaction is not completed under certain circumstances.
J.P. Morgan Securities Inc. served as financial advisor to Quad/Graphics and Foley & Lardner
LLP and Torys LLP provided legal counsel. Morgan Stanley served as financial advisor to
Worldcolor and Sullivan & Cromwell LLP and Osler, Hoskin & Harcourt LLP provided legal
Investor Conference Call and Webcast
Worldcolor will hold an investor call and webcast, to be led by Mr. Angelson, today at 10:00
a.m. Eastern Time / 9:00 a.m. Central Time to discuss this morning’s announcement. Mr.
Quadracci and John Fowler, Senior Vice President and Chief Financial Officer of
Quad/Graphics, will join the call as guests. The webcast can be accessed through the investor
relations section of the Worldcolor Web site at www.worldcolor.com. Investors and analysts
may participate in the call by dialing 877-941-8632 (toll-free domestic), conference ID
4205698. International callers should dial 480-629-9821, conference ID 4205698. Please dial
in at least 10 minutes in advance. A replay of the call will be available for one week via the
telephone starting at approximately one hour after the conclusion of the call today and can be
accessed at 800-406-7325 (toll-free domestic) or 303-590-3030 (international), conference ID
4205698. The webcast will be archived on Worldcolor’s Web site.
Quad/Graphics (www.QG.com) is a leading printer of catalogs, magazines and other
commercial products. Headquartered in Sussex, Wisconsin (26 miles west of Milwaukee) and
with11 plants in the United States and several overseas, the company provides services
ranging from front-enddesign and photography through digital imaging, printing, finishing,
mailing/distribution (including the industry’s largest co-mail program) and data-driven
marketing solutions such as data optimization and analytics.
Worldcolor is anindustryleader in providing high-value and comprehensive print, digital and
related services to retailers, catalogers, publishers, branded-goods companies and other
businesses worldwide. Founded in 1903, Worldcolor’s products include advertising insertsand
circulars, catalogs, direct mail products, magazines, books, directories, digital premedia,
logistics and mail list technologies. During its century-long existence, Worldcolor has had a
rich tradition of leadership and excellence. Its employees are focused on helping customers
meet their needs from facilities located in the U.S., Canada, Argentina, Brazil, Chile,
Colombia, Mexico and Peru. More information about Worldcolor can be found on its Web site