Courts approve Quebecor World reorganization; now the tax man has to say yes

The courts have approved the reorganization of Montreal-based printer Quebecor World, but it depends on whether the U.S. Internal Revenue Service approves the company’s proposed settlement of approximately $22.5 million in unpaid taxes, the court said.

According to a story in Folio:, both a bankruptcy court in New York and Quebec’s Superior Court courts agreed that Quebecor’s noteholders, debtors and creditors committee also must reach an “acceptable compromise” on the definitive terms of the plan. A joint hearing July 13 to determine if all terms have been satisfied, Quebecor said.

The U.S. government had objected to Quebecor’s reorganization plan because it owed taxes and released third parties from environmental penalties.

“This is a major milestone in successfully restructuring our company to benefit all stakeholders,” Quebecor’s president and CEO Jacques Mallette said in a statement. “We look forward to exiting creditor protection in mid-July and moving forward with the implementation of our business plan as a strong competitor in the industry.”

Quebecor World to be chaired by former head of major printing rival

Brian Mulroney is no longer chairman of the board of Quebecor World, replaced by a veteran of the U.S. printing industry Mark Angelson, according to a story from Canadian Press. It seems ironic that Angelson was the head of R. R. Donnelley, a major printing rival, until 2007. Donnelley was recently unsuccessful in an unsolicited $1.55 billion bid to take over Quebecor World as it emerges from bankruptcy protection.

Only one QW board member was returned at Monday's vote: CEO Jacques Mallette.

Other new appointees to Quebecor World's board include former Reader's Digest chief executive Tom Ryder and Jack Kliger, ex-president of Hachette Filipacchi. Both men are former chairmen of the Magazine Publishers' Association. Ryder sits on the boards of Amazon.com, Virgin Mobile and Starwood Hotels.

Filling out the nine-member board are Raymond Bromark, a retired senior partner of PricewaterhouseCoopers, turnaround specialist James Gaffney, printing industry veteran Michael Allen, former Alcan executive David McAusland, and Gabriel de Alba, managing director and partner of Catalyst Capital Group of Toronto.

The story said the appointments come a day after Quebecor's Canadian and U.S. creditors voted to support restructuring plans that will allow the company to emerge from bankruptcy protection.

Monday's vote will allow Quebecor World to convert nearly US$3 billion of debt into new equity. The Montreal-based printer has been under court protection in Canada and the United States since January 2008.

Quebecor World expects to unveil its new corporate name before Tuesday's New York Bankruptcy Court hearing confirming the creditors votes.

Quebecor World merges magazine, book and directory divisions

Quebecor World Inc. has merged its magazine, book and directory divisions into a single operating structure called the publishing services group. It's another step in QW's attempt to right itself after plunging to near bankruptcy. The company now has three divisions instead of six, following the earlier integration of retail insert, catalog, Sunday Magazine and direct divisions into the marketing solutions group and of the logistics and premedia divisions

Kevin J. Clarke will lead the new publishing services group. He was president of Quebecor World's book and directory publishing services group for the last 5 years.

Quebecor World wins contract to print Rolling Stone, Details and Men's Journal

Quebecor World may have taken a step or two back from the brink of bankruptcy with the signing of a multi-year agreement with Wenner Media to print Rolling Stone, US Weekly and the Men's Journal, according to a story in the U.K. magazine PrintWeek. Last week the company signed a $285m (£143.8m) textbook printing agreement with McGraw-Hill.

The deals are a sign of hope for Quebecor World which had up to now been plagued by clients jumping ship, most notably Rodgers' move to rival Transcontinental, which saw it leapfrog Quebecor as Canada's largest printer.

In January, Quebecor filed for Chapter 11 in the US and bankruptcy protection in Canada and has since been restructuring its operations across the globe, including the closure of its plant at Corby, Northants, as it attempts to return to profitability.

Et tu, TVA? Quebecor World may lose its cousin magazines' business

Insult is added to injury for beleagured printer Quebecor World as it appears its parent company's magazine division may move some of its printing business to other suppliers. This, on top of the threat of losing the printing of The Economist, the loss of all of Rogers Publishing's magazines and the discontinuation of the 9 million press-run Canadian Tire catalogue.

According to a story in the Globe and Mail, Publications TVA Inc., Quebec's largest consumer magazine publisher, is considering entering into alternative printing arrangements.

"Publications TVA is assessing the possibility of letting a minority percentage [of its magazines] go to other printing companies, for practical and logistical reasons," [company spokesman] Luc Lavoie said.

Mr. Lavoie said no final decision has been made yet on whether to go with other printers for some titles and that the "vast majority" of the 50 or so magazines in the TVA stable will continue to be printed by Quebecor World. He would not provide further details.

Among titles of Outrement, Que.-based Publications TVA are several highly popular celebrity gossip magazines, including 7 Jours, Le Lundi and Star Système.

Canadian Tire ends catalogue after 80 years; another hit for Quebecor World

It is one whammy after another for Quebecor World. Not only is it effectively disowned by its parent company, Quebecor Inc. (one of Canada's leading magazine publishers through its media division), but it also is desperately trying to renew a contract with the Economist, which served notice last week. (See earlier posts.)And now, Canadian Tire has announced that it is discontinuing its iconic paper catalogue after 80 years. The reason? Most people are accessing the catalogue's contents online. With its decision goes the not inconsiderable business of printing the estimated 9 million copies of the catalogue in English and French.

While it is not strictly a magazine story, the end of the Canadian Tire catalogue is a real marker in the changing nature of the print marketplace. Things like directories and catalogues so naturally lend themselves to the searchability and quick updating that the web allows (encourages)that printing and mailing them is becoming not only uneconomic but also no longer sensible.

Canadian Tire customers are being informed about the change, ironically, through this week's printed flyers. While such flyers may continue, their role now will be more and more to drive people to the web. The catalogue content will, of course, continue online in some form.

"We've done a lot of research around customer shopping habits and the reality is, with consumers, they really are spending a lot more time online, that's where they go to obtain the information they're looking for," Lisa Gibson, a spokeswoman for Canadian Tire, told the Canadian Press.

"There's a lot of research out there that says the readership and retention of annual catalogues is declining, and obviously, as a result (of the change) you're saving that many catalogues from being printed and then ending up in the recycling or garbage."

The Canadian Tire decision won praise from environmentalists.

"Catalogues have a tremendous environmental impact, from forests that are clear cut to produce them to the energy consumed during manufacturing and delivery," stated ForestEthics' Gillian McEachern.

"(The) announcement by Canadian Tire demonstrates that dramatically reducing paper use makes good business sense."

The catalogue was started in 1928, the year after they founded the company, by brothers John W. and Alfred J. Billes.The first edition featured tires on one side and a road map of Ontario on the back. (A history of the company.)

Another mag customer wants to bail from Quebecor World

The Economist magazine has applied to the courts to be allowed to give Quebecor World formal notice at the end of the month that it wants to terminate its printing contract with the troubled company, a division of Quebecor Inc.

According to a story in the Globe and Mail, the prestigious customer filed a motion in U.S. Bankruptcy Court in the Southern District of New York. Because Quebecor World is in Chapter 11 bankruptcy protection, there is a standstill on changes to any contracts. The company wants that stay lifted to allow notice to be given.

“The Economist is being harmed by the continuance of the automatic stay since the stay is all that prevents The Economist from exercising its undisputable contractual right to terminate the printing agreement by timely serving a written notice to terminate,” says the filing.

The Economist's move follows on the decision last month by Rogers Publishing to move printing of all of its consumer and trade magazines to Transcontinental Media at the end of next year.

Quebecor World may have no choice but to be sold, say analysts

The giant multinational printing arm of Quebecor Inc., Quebecor World, may not have any choice but to put itself up for sale, according to unnamed analysts quoted in a wire story by Reuters. (You can read some of the lamentable background in earlier posts here and here.)

The company said this week its lenders have effectively given it until mid-month to come up with $125 million of new financing and until the end of June to repay its current credit facility in full and terminate its North American securitization program.

Analysts estimate the credit facility and securitization program together represent about $900 million.

But given that prospective lenders have turned off the taps of easy debt amid the credit crunch, raising such an amount promises to be difficult.

"I think your best option is to sell the company," said one analyst on Thursday, speaking on condition of anonymity. "Barring that, I'd be very surprised if they can pull it off."

The company, which has 28,000 employees worldwide, saw its stock plummet to $1.49 today (last February it was $17.25). No suggestions are being made of what price the company would fetch if it went to market; likely it would be broken up and cherry-picked by major competitors such as R. R. Donnelly and Transcontinental Inc.

Transcon might be interested in the right pieces of Quebecor World

Transcontinental Inc. might be interested in parts of troubled Quebecor World, but only if it fits with the company's "niche" strategy. CEO Luc Desjardins told The Canadian Press that the company is always interested in opportunity, but while it wants to continue to grow, it plans to focus on very specific niches that have proven successful. These include direct marketing, digital media and outsourced printing of U.S. newspapers.

"We always look at evaluating all opportunities in North America, but only opportunities that enhance our niche strategy," CEO Luc Desjardins said in a conference call to discuss fourth-quarter and 2007 results.

"We don't look at becoming the largest printer but the best in our niches."

"If there are assets that become in these areas, it's something that we would look at, regardless of the owner," CFO Benoit Huard said.

Transcontinental reported Tuesday a 24 per cent drop in quarterly earnings, pulled down by the strong Canadian dollar. The company earned $38.6 million, 46 cents per share, in its fourth quarter ended Oct. 31, compared with year-ago net income of $51.1 million, 59 cents per share.

Wounded Quebecor World being circled by possible buyers

Speculation is rife that troubled printing giant Quebecor World, owned by Quebecor Inc., may be a takeover target, as its chief executive was shown the door yesterday and the company's share price plunged another 10% to $1.57 (it was more than $17 last February). According to a story in the Globe and Mail, quoting anonymous sources, U.S. printing giant R. R. Donnelly and takeover specialist funds Kohlberg Kravis Roberts & Co., Cerberus Capital Management LP and QW's crosstown rival Transcontinental Inc. are among those eyeing the wounded company.

It was announced by Quebecor Inc. boss Pierre Karl Péladeau that CEO Wes Lucas, who has been with the company less than two years, has left to pursue other opportunities, replaced by chief financial officer Jacques Mallette. Péladeau.

[Péladeau] wants the new boss at Quebecor World to cut any remaining fat at the company and the word is out that each unit must sink or swim, a source said.

Quebecor World has already been through several waves of cost cutting over the past years as it struggles with difficult market conditions and razor-thin margins.

Some analysts warned last week that the company faces an uncertain future, and possibly insolvency, in the face of a potential liquidity crisis.

For background, see earlier posts on this company.

Quebecor World's sale of European business falls through

Worse and worse. Giant multinational printer Quebecor World, controlled by Quebecor Inc., which is also is the largest magazine publisher in Quebec, saw its shares plunge more than 30 per cent on Thursday when it announced that its sale of its European printing business to a Dutch company had fallen through. Quebecor World shares dropped 79 cents to $1.47 on the Toronto Stock Exchange. A year ago, it was in the $17 range.

According to a Reuters report, shareholders of the Dutch group Roto Smeets de Boer had rejected the $341 million purchase of the Canadian printer's money-losing European business.

The setback will only exacerbate Quebecor World's struggle over liquidity. Last month QW withdrew a refinancing plan and it had also suspended dividends on two series of its preferred shares.

For background, see earlier posts.

Is Quebecor cooling to the printing business?

Andrew Willis of the Globe and Mail has an interesting posting on the Streetwise blog about Quebecor World, the massive printing arm of Quebecor Inc. Essentially, he is saying that recent actions of the parent company means it is leaving its printing subsidiary to twist in the wind. (See earlier post for background)

The oldest adage in business journalism is, follow the money. Doing so at Quebecor leads to interesting conclusions about the future of the media company’s stake in Quebecor World.

Willis points out that the company is investing most of its cash in its Nurun interactive media division rather than bailing out Quebecor World. QW has told preferred shareholders they have until the day after Boxing Day to convert their preferred shares (which stopped paying dividends last month) to common shares. The result would be to dilute the common shareholders by 66 per cent.

The harsh reality for Quebecor appears to be the view that printing is part of its past, while subsidiaries such as Nurun are the future. The parent company seems prepared to accept massive dilution on its stake in Quebecor World, and quite happy to let the printer refinance its debts on its own in 2008.

Quebecor's World of troubles continue

With Quebecor World suspending dividends on its preferred stock, the buzz around its financial troubles is becoming predictably more speculative and occasionally bizarre, with suggestions in a Reuters story

• that the value of the company's stock could conceivably plunge to zero;
• that Transcontinenental Inc., a major rival, would be a potential buyer of the book, directory and marketing businesses;
• that the Peladeau family might have to pay $6 or $7 a share to privatize the company (the stock yesterday had fallen to $2.45);
• that huge U.S. printer R.R. Donnelly might be a strategic buyer, but would have to sell other assets to get around regulatory hurdles

The giant printer is controlled by Quebecor Inc., also Quebec's largest publisher of consumer magazines. Quebecor owns 35% of Quebecor World shares and 84% of the votes. The company's stock has fallen 85% since February.

See earlier posts for background.