How Will RR Donnelley’s Recent Acquisitions Affect Book Publishers?
Whether it’s an example of survival of the fittest for printers or merely another entry in a long line of acquisitions, RR Donnelley & Sons put the publishing industry on notice as it completed its “trilogy of transactions” this week, a course of action the industry’s top commercial printer says will help offer its customers greater capacity and flexibility.
The Chicago-based printer announced it would make an all-cash purchase of educational-book printer Von Hoffmann from Visant Corp., in a deal valued at $412.5 million, RR Donnelley officials said Wednesday.
“In concert with our fully integrated international production platform, the addition of Von Hoffmann’s facilities will offer our customers enhanced responsiveness as well as the ability to leverage our leading catalog, premedia, logistics and other production and service resources,” said John Paloian, RR Donnelley group president, publishing & retail services, in a statement.
During the past two months, Donnelley has gone on a spending spree of nearly $2 billion by also buying Menasha, Wis.-based Banta Corp. and Waterloo, Wis.-based magazine and catalog printer Perry Judd’s Holdings. All three of the deals are expected to close during the first quarter of the year.
Harris DeWese, chairman and CEO of Compass Capital Partners and longtime columnist for Book Business’ sister publication Printing Impressions, says the recent deals are a sign the pendulum may be swinging in favor of printers. Expect prices to rise throughout the printing industry in a short time, he said.
“The customers have been in charge for too long,” DeWese said. “By pitting one printer against another, they’ve gotten the price they wanted. As these bigger printers grow larger. ... you have a market, i.e. books, that’s driving toward price equilibrium.”
DeWese says other printers, especially smaller one, and those who use them for their services, will take heed of the latest Donnelley acquisition. He believes as long as “the big guys” can get by the Hart-Scott-Rodino Antitrust Improvements Act requirements, expect to see further consolidation of printers.
“Von Hoffman just extends [Donnnelly] down in run length into shorter run lengths, which will encroach on any of the smaller printers,” DeWese says. “The move by Donnelley to buy something as big as Von Hoffman will really put more pressure on. You may see consolidation among lesser companies or you may see the companies’ profits begin to decline. What’s happening in a lot of the printing segments is almost a natural evolution. It’s Darwinian—the strong get stronger, and the weak disappear and die. It’s an inevitable force, almost immutable, that is leading to these specialized acquisitions. A handful of very large companies will control printing.”
Last week, two other top printers merged. Cadmus Communications was acquired by Cenveo for $430 million.
Industry analyst Steven W. Frye, owner of Frye Publication Consulting and Book Business columnist, is less apprehensive the recent deals will have an industrywide impact. Those who will encounter the most changes will be the companies being purchased and those who use their services.
“Conventional wisdom says the less vendors we have to go to the less deals we’ll get because there are less options,” he says. “But historically, no matter who owns the plants, it doesn’t seem to impact the overall marketplace. We’re paying less now than we ever did. That savings has been coming from technology.”
According to Frye, previous Donnelley mergers were initially met with an exodus of clients, many used to more “personable service from smaller printers,” but that Donnelley proved itself with successful management of the new acquisitions.
“[Donnelley] has one of the [least] customer-friendly contracts,” he says. “You have to deal with a lot of lawyers. It’s very frustrating and intimidating. What’s happening, in my opinion, is the plants in Banta and Perry Judd’s will continue to run with a new owner. How are they going to be affected by that owner? I think we’ll see a shaking out of people that don’t want to be Donnelley customers. Those who don’t panic will be in a better situation.”
RR Donnelley representatives did not provide responses to Book Business Extra’s questions before press time.