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Quebecor buys World Color
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July 12, 1999: 1:59 p.m. ET
Canadian firm's $1.4B purchase of U.S. rival to create world's largest printer
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NEW YORK (CNNfn) - Canadian printing company Quebecor Printing Inc. Monday agreed to buy U.S. rival World Color Press Inc. for $1.4 billion in cash and stock, creating the world's largest commercial printing company.
The deal - which also includes a $1.3 billion assumption of debt - will double Montreal-based Quebecor's sales and allow the company access to key markets in the U.S. and Europe, markets it previously spent much time and money competing for.
World Color (WRC)'s shares surged 4-5/8, or almost 16 percent, to 34-7/16 following the announcement of the deal. Quebecor Printing (PRW) shares that trade on the New York Stock Exchange fell 1-1/8 to 22-9/16.
The agreement reverses a recent trend of U.S. super firms sweeping in and gobbling up Canadian companies. That trend was exemplified last month when Weyerhaeuser Co. (WY), the third-biggest U.S. forestry company, snagged Canadian forestry giant MacMillian Bloedel Inc. (MMBL) in a $2.45 billion stock swap -- helping one of the world's biggest forestry producers get even bigger.
A complicated arrangement
The Quebecor-World Color agreement involves several complicated steps.
First, a subsidiary of Quebecor Printing will make a tender offer for up to 23.5 million, or about 62 percent, of World Color's common shares outstanding. Quebecor Printing will pay about $840 million in cash, or $35.69 per share, for the tendered securities.
There's also an approximately $560 million stock component to the deal, in which Quebecor Printing will issue about 23.8 million of its subordinate voting shares for World Color common shares at a fixed exchange ratio of 1.6455-to-1. The component includes a payout to World Color option holders of about $41 million in cash and 1.2 million subordinate voting shares.
Finally, Quebecor will assume about $1.3 billion of World Color's debt.
All totaled, the deal is valued at approximately $2.7 billion, making the combined company the largest printer of magazines, catalogs and advertising inserts in the world.
Some 62 percent of the deal is based on cash and the remaining 38 percent is based on exchanging Quebecor shares for World Color stock and options, said Robert Lewis, World Color's chief financial officer.
"It's a little complicated, but from a fiduciary standpoint and from a shareholder standpoint it's a great deal because it offers value to both Quebecor and World Color shareholders," said Lewis. "The people that stand most to benefit though are our customers, because of the broadened market we can now serve."
Lots and lots of ads and flyers
Quebecor Printing, which had 1998 sales of US$3.82 billion, is controlled by the Peladeau family, headed by Quebec business magnate Pierre Peladeau. The acquisition will double Quebecor Printing's business in the $150 billion U.S. market, the world's largest, and catapult it ahead of Japan's Dai Nippon Printing Co., currently the No. 1 printer. World Color, based in Greenwich, Connecticut, had 1998 sales of US$2.36 billion.
The new company, to be called Quebecor World Inc., will have total sales of $6.2 billion and will hold the No. 1 spot in both the U.S. and European markets. The U.S. is by far the biggest print market in the world with total sales of some $153.4 billion, compared to the $90 billion European markets, according to industry studies.
Quebecor Printing already has a commitment from World Color's largest shareholder, Kohlberg Kravis Roberts & Co., which owns 24.5 percent of the stock.
Charles Cavell, president and chief executive of Quebecor Printing, will head the merged company.
Robert G. Burton, chairman and chief executive officer of WCP, will leave following the completion of the takeover, but will hold a director's position on the joint board.
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