Giant swap, still subject to approval, sees Transcontinental take over former Quebecor World printing plants

Canada's largest printer, Transcontinental Inc. (which is also the country's largest publisher of consumer magazines) just got a whole lot bigger as it has conducted a huge swap with U.S.-based Quad/Graphics for the assets Q/G took over from the troubled former printing giant Worldcolor Press (formerly Quebecor World). Quad/Graphics retained only a Vancouver plant to service its U.S. Pacific Northwest clients.

Under terms of the swap Transcon sold three Mexican printing plants and some other assets to Quad/Graphics and bought 6 Canadian printing plants and a prepress firm. No value was announced for the deal itself but it would be worth tens of millions of dollars in property value alone. Quad/Graphics has said that Transcontinental takes over about US$75 million in pension and post-retirement obligation. The Canadian plants employ 1,500 people and the Mexican operations had 900. Three of the former Quebecor World plants are located in Ontario, two in Quebec, one in Alberta and one in Nova Scotia and the forecasted revenue for all of them was about US$310 million in revenues in 2011while revenues for the Mexican assetswere expected to be C$67 million. Francois Olivier, the CEO of Transcon says in a company release that the transactions will generate at least $40 million in earnings within a year or two of the deal closing. Olivier said that the print markets suffered from overcapacity and the takeover of the plants would allow Transcon to make better use of about $700 million in investments it has made recently.

Quad/Graphics bought the Canadian assets of Worldcolor Press Inc. (previously Quebecor World) in early 2010 for about $1.3 billion and at the time the CEO said the takeover would enhance its leadership position in the printing industry. At least in Canadian terms, that mantle now rests squarely on the shoulders of Transcontinental.  

The deal is subject to approval under the Canadian Competition Act and one of the questions that might be asked is whether approval would have been forthcoming had Transcon done a straight-ahead takeover offer for Worldcolor when it was in trouble and available. Whether this consolidation gives Transcontinental leverage that could significantly reduce competition in the industry, hence driving up print pricing, remains to be seen.

It seems highly likely, however,that there will be significant rationalization of plant, management and staffing. 

Related posts:

• Quad/Graphics shifting magazine printing from Edmonton to Aurora
• Quad/Graphics closure of 5 U.S. plants is fallout from takeover of Worldcolor (nee Quebecor World)
• Giant Quad/Graphics Inc. buys Montreal-based Worldcolor Press
• Worldcolor consolidates printing plants with loss of 150 jobs
• New logo for former Quebecor World magazine printer
• Courts approve Quebecor World reorganization; now the tax man has to say yes
• Donnelley gives up in bid to take over Quebecor World
• Quebecor World board rejects sweetened Donnelly offer 
• Printer vs. printer: R. R. Donnelly makes unsolicited bid for Quebecor World 
• Quebecor World seeks, and gets, bankruptcy protection