Quebecor World beats a retreat from Europe

Quebecor World, the international printing arm of Quebecor Inc., which owns one of Canada's major magazine publishing operations (mostly in French) has admitted defeat and is retreating from the European printing market to concentrate on its North American printing business.

According to various reports including one in the Globe and Mail, it has announced that it is selling 18 plants in seven European countries to Dutch-based RSDB NV for $341-million (U.S) in a combined cash, debt and stock transaction.

Quebecor World will retain a 29.9-per-cent stake and two of five board seats in Roto Smeets Quebecor (RSQ), the merged entity made up of Quebecor World's European operations and RSDB's seven Dutch printing facilities and another in Hungary. Quebecor World employs 4,000 people in Austria, Belgium, Finland, France, Spain, Sweden, and Britain.

It is a humiliating climbdown for Quebecor and its chief executive Pierre Karl Peladeau (left) who championed the European acquisitions during the 1990s. But he had to bow to the reality of there being no end in sight to the red ink that had bled out of the European plants for several years.

The European operation ran into obdurate unions and anemic returns (in the 3rd quarter the division had profits of just 1.5% compared with 11% in the North American printing operations.

In a conference call with analysts, Quebecor World chief financial officer Jacques Mallette couldn't have been more clear: The company will not spend another cent in Europe. As such, debt rating agency DBRS called the transaction “slightly positive” in a note yesterday.

The deal gave Quebecor World an overall loss of $315 million in the 3rd quarter after accounting for $294 million in charges, including $272 million for its European unit. Quebecor World's stock price is down 44% over the past year, as investors could see no end to the problems the European operation posed.