The Jan. 26, 2010 announcement that the boards of directors of Quad/Graphics, Inc., the largest privately held printer in the U.S., and World Color Press Inc., the second largest provider of print, digital and related services in the Americas, approved a definitive arrangement agreement whereby Quad/Graphics will acquire Worldcolor, has obviously drawn much interest on the printing side of the business.
Should it gain the necessary approvals, the acquisition will be finalized in mid-2010. When it is completed, Quad/Graphics will have nearly 30,000 employees serving customers in the U.S., Canada, Latin America and Europe. All told, Worldcolor and Quad/Graphics had combined revenues for the 12-month period ended Sept. 30, 2009 of $5.1 billion and aggregate unaudited adjusted EBITDA of U.S. $647 million.
Once completed, Quad/Graphics will be the second-largest printer in North America behind R.R. Donnelley & Sons (approximately $10 billion in annual sales), and will be a major power in the magazine, catalog, retail insert, book directory, and direct mail segments. The combined companies will also have a stronger presence in Latin America and Europe, where Quad/Graphics recently made its initial entrance into the market.
While much of the focus understandably has been on the printing side of the business, publication ink manufacturers are undoubtedly paying much attention to this merger. As the merger is not yet finalized, there have been no plans made regarding ink supply, but Quad/Graphics is well positioned in the ink field.
Back in 1982, Quad/Graphics formed its own ink manufacturing division, Chemical Research/Technology (CR/T), which produces more than 130 million pounds of offset and publication gravure ink annually. In the past two years, CR/T completed state-of-the-art expansion of its offset ink facilities in Wisconsin and its gravure ink manufacturing plant in Martinsburg, WV.
In order to supply Quad/Graphics’ existing printing operations in Europe, CRT Sp. z o.o., located in Wyszków, Poland, is scheduled to start-up in mid February 2010. Claire Ho, Quad/Graphics’ manager of corporate communications, noted that this facility will supply Quad/Graphics’ European plants, which are located in Piła, 300 km east of Berlin, and Wyszkow, near Warsaw.
Once the merger goes into effect, there will likely be changes for major ink suppliers. In the publication gravure market, there were three North American printers (Quad/Graphics, RR Donnelley and Worldcolor) and three North American publication gravure ink manufacturers (Sun Chemical, Flint Group and CR/T), prior to the merger. Combining Quad/Graphics and Worldcolor would seem to leave one ink manufacturer out, and it is doubtful that RR Donnelley's business can sustain both Sun Chemical and Flint Group in the publication gravure ink business. On the web offset side, it is likely that the large ink manufacturers will take aim at smaller accounts in order to maintain capacity.