R.R. Donnelley & Sons Company (NYSE: RRD) announced
today that it had submitted a written indication of interest to
acquire all or substantially all of the assets and properties of
Quebecor World Inc. (�Quebecor World�). RR�Donnelley further
indicated to Quebecor World that it was prepared to move
expediently to a legally binding purchase agreement, pending the
completion of due diligence. The Company noted that it believed the
non-binding proposal offered Quebecor World�s debtors and their
creditors superior terms to the current draft amended
reorganization plans recently proposed as part of Quebecor World's
ongoing bankruptcy proceedings in the United States and Canada.
�Quebecor World and RR�Donnelley have long represented a strong
strategic fit with one another and, through this proposal, we have
the opportunity to join them together in a way that greatly
benefits stakeholders of both companies, including Quebecor World's
debtors and their creditors,� said Thomas J. Quinlan III,
RR�Donnelley's President and Chief Executive Officer. �Our offer
would significantly enhance our ability to provide customers more
comprehensive end-to-end printing solutions, expand our geographic
reach into the important Canadian market and better balance our
capacity with customer demand � all while achieving significant
immediate and long-lasting synergies. We look forward to the chance
to work with the debtors as they develop the plan that they feel is
in the best interests of their stakeholders.�
Key aspects of RR�Donnelley�s proposal include:
- The purchase consideration would
consist of cash and shares of RR�Donnelley�s common stock.
- The transaction is not subject
to any financing condition and no shareholder approval is
required.
- The transaction under the
proposed terms would be accretive to RR Donnelley shareholders
after the first 12 months of combined operations.
A copy of the full letter follows:
May 12, 2009
� Jacques Mallette President and Chief Executive Officer Quebecor
World Inc. 999 de Maisonneuve West Suite 1100 Montr�al, Province of
Qu�bec H3A 3L4 � David McCarthy President Quebecor World (USA) Inc.
150 East 42nd Street New York, NY 10034 � Steven Strom Managing
Director Jefferies & Company, Inc. 520 Madison Avenue, 10th
Floor New York, NY 10022 �
Re: Purchase of All or Substantially All of the
Assets of the U.S. and Canadian Debtors
Ladies and Gentlemen:
As you know, on August 11, 2008 we expressed to you in writing
our interest in acquiring a significant portion of the assets and
businesses of Quebecor World. We subsequently further indicated our
interest in pursuing a transaction in conversations with various
people, including Mr. Randy Benson, Chief Restructuring Officer of
Quebecor World Inc. (�QWI�),
Mr. Andy Kramer of UBS, and Mr. Eric Korsten of Jefferies &
Company, Inc. Although we have not received any response to our
previous proposal, we have continued to follow the
publicly-available information concerning your reorganization
proceedings.
We recently reviewed the draft First Amended Plan of
Reorganization proposed with respect to the U.S. bankruptcy
proceeding and the draft Plan of Reorganization and Compromise
proposed with respect to the Canadian reorganization of QWI. We
refer to these documents as the �Plans�, and to QWI, Quebecor World (USA)
Inc. and their debtor affiliates as the �Quebecor Debtors�.
After reviewing the draft Plans in light of our own valuation of
the relevant companies as stand-alone businesses, we believe that
the proposed transaction set out in this letter is superior for the
Quebecor Debtors and their creditors to the restructuring proposed
by the Plans in their current form. Accordingly, R.R. Donnelley
& Sons Company (�RRD�) is
pleased to submit to you a preliminary indication of interest to
purchase all or substantially all of the assets and properties of
the Quebecor Debtors (including shares of their Latin American
subsidiaries), free and clear of all claims and interests, on the
terms and conditions described below (the �Acquisition�). RRD is ready to proceed as
quickly as possible to reducing its proposal to a legally-binding
asset purchase agreement for implementation in a court-approved
sale pursuant to Section 363(b) under the U.S. Bankruptcy Code and
accompanying proceedings under the Companies� Creditors Arrangement
Act (�CCAA�). We would be
willing to consummate the Acquisition prior to or in connection
with plan confirmation, as you consider in the best interests of
the Quebecor Debtors and their creditors.
We understand and appreciate the time and effort that have gone
into preparing the Plans, but we only learned of the Plans� terms
upon publication and, in light of those terms, we would like to
submit another approach for your consideration as you weigh the
options available to you to propose the best possible plan of
reorganization for the Quebecor Debtors and their creditors.
Proposal
The key provisions of our proposal are as
follows:
(a) Purchase Consideration. We propose to pay
the Quebecor Debtors (in the aggregate):
- cash in an amount equal to the
cash amount contemplated for distribution under the draft Plans,
which we believe is approximately US$700,000,000; plus
- cash on balance sheet (estimated
as of June 30, 2009, at $257,000,000 pursuant to the Plans);
plus
- 30 million shares of RRD common
stock, which represent approximately 15% of RRD�s outstanding
shares and have a value of US$394,200,000 based on the closing
trading price on May 11, 2009. RRD common stock is listed for
trading on the New York Stock Exchange, and the current market
capitalization of RRD is approximately US$2.7 billion.
We believe that the publicly-listed common
stock of the pro forma combined company will offer attractive
investment characteristics for current creditors of the Quebecor
Debtors when compared to the newly-issued securities of a
stand-alone reorganized company. In addition to providing an
attractive valuation today and immediate liquidity, for those
investors that choose to remain stockholders of RRD, our proposal
offers the opportunity to enjoy the synergies involved in the
Acquisition and participate in any future appreciation of RRD stock
as we grow our business around the world. This is an exciting
opportunity and we expect that the Acquisition will be accretive to
RRD stockholders after the first 12 months of combined
operations.
(b) Valuation Assumptions. Our proposed
acquisition price is based on publicly-available information and
our deep knowledge of the industry. We have assumed (i) interim
operations in the ordinary course, (ii) normalized working capital
at closing, (iii) the assets and properties of the Quebecor Debtors
(and their Latin American subsidiaries) are consistent with our
business expectations based on our industry knowledge and our
review of public financial information, (iv) the non-debtor
subsidiaries are free of liabilities outside of the ordinary course
of business, and (v) the assets and properties of the Quebecor
Debtors will be transferred to us free and clear of all claims and
liabilities (other than ordinary course trade payables, specific
contracts that we ask you to assume and assign to us, and other
liabilities to be agreed).
(c) Financing. There would be no financing
condition to the Acquisition. We have sufficient funds to pay the
cash portion of the consideration from cash on hand and/or
availability under our existing revolving credit facility.
(d) Internal Approvals. This proposal has
been reviewed at the highest levels of RRD and we are pleased to
advise you that the only further internal approval necessary for
the execution and delivery of a binding asset purchase agreement is
the approval of our Board of Directors. No shareholder approval is
required.
(e) Due
Diligence. We are prepared to work with you and our
respective advisors to proceed as expeditiously as possible to
complete our business, financial, accounting, tax, environmental
and legal due diligence review, including meetings with QWI�s
management, and the reasonable opportunity to inspect QWI�s
facilities. With access to the right data and personnel, we are
confident that this work could be completed without material
delay.
(f) Regulatory Matters. The Acquisition will
require expiration of the applicable waiting period under the U.S.
Hart-Scott-Rodino Act and under the Competition Act Canada, if
applicable, approval under the Investment Canada Act and,
potentially, filings in other jurisdictions. We and our advisors
have done considerable work assessing the regulatory issues
associated with the proposed Acquisition and are confident that the
proposed Acquisition can be completed in a timely manner.
(g) Competitively Sensitive Information. We
are sensitive to any concerns that you may have with respect to the
treatment of competitively sensitive information during the due
diligence process. One of the first conversations that we would
like to suggest take place would be between your antitrust counsel
and our antitrust counsel at Sullivan & Cromwell LLP and Osler,
Hoskin & Harcourt LLP. Our advisors are very familiar with the
issues relating to conducting diligence for potential strategic
transactions in this industry and can describe to you the set of
safeguards that we would implement to avoid any risk that
information is shared inappropriately.
(h) Structure and Documentation. The
purchaser would be one or more wholly-owned subsidiaries of RRD.
There would be no other investors or sources of capital or
financing for the Acquisition. We would expect the transaction to
be documented in a customary asset purchase agreement, with an
agreed form of bidding procedures, contract procedures and sale
order for the U.S. proceeding, and appropriate equivalent Canadian
documents and proceedings relating to the CCAA. The asset purchase
agreement would be effective upon court approval and would include
customary representations, warranties, covenants and closing
conditions and other terms customary for similar transactions.
Following due diligence, we are interested in exploring alternative
structures in order to achieve the most tax efficient transaction
for the parties.
(i) Stalking Horse Protections. We do not
require any exclusivity period, no-shop provisions or expense
reimbursement to conduct due diligence or finalize the terms of the
proposed Acquisition. However, once we execute a definitive asset
purchase agreement, we will require customary protections for a
stalking horse bidder in light of the value created for the
Quebecor Debtors by our offer, including overbid protections and
other bidding procedures to be agreed, milestones to closing and a
termination right if the milestones are not met, expense
reimbursement, and, in the event the Quebecor Debtors consummate an
alternative transaction, a break-up fee in an amount to be
agreed.
Process
We would like to suggest that you immediately identify a working
group at the Quebecor Debtors that can work with us and our
advisors, Sullivan & Cromwell LLP, and Osler, Hoskin &
Harcourt LLP, to conduct the due diligence process and finalize the
terms of the definitive asset purchase agreement. As mentioned
above, prior to signing a definitive asset purchase agreement, we
require no expense reimbursement and no deal protection of any
sort. We understand that the Quebecor Debtors would be free to
abandon discussions with us at any time (and vice versa), and we
believe that we can progress very quickly to agree upon a
transaction without materially impairing your ability to solicit
approval of the current draft Plans later if for any reason you
decide not to proceed with a transaction with RRD. We stand ready
to execute a customary confidentiality agreement upon request.
About RR Donnelley
RRD is a full-service provider of print and related services,
including business process outsourcing. RRD provides the industry�s
broadest product and service line, including solutions in
commercial printing, direct mail, financial printing, print
fulfillment, labels, forms, logistics, call centers, transactional
print-and-mail, print management, online services, digital
photography, color services, and content and database management to
customers in the publishing, healthcare, advertising, retail,
technology, financial services and many other industries. RRD�s
broad product and service mix enable the company to provide
end-to-end services to customers in virtually every business,
education, government, and non-profit sector.
RRD has operations on four continents to provide exceptional
service to leading global organizations. Its agile fleet of digital
printing devices includes more than 1,000 proprietary and
commercially-available units across more than 60 facilities
worldwide.
Through its leading proprietary eCommerce systems it provides
customers a comprehensive array of print management, premedia, and
other services. RRD�s development pipeline continues to deliver
innovations, such as the world�s first 1200 dpi 4-color inkjet
press and the company�s recent announcement of a breakthrough that
will bring lithographic economics, flexibility, and performance to
variable printing.
Its logistics capabilities include services that help it
effectively deliver customers� mail deep into the postal stream,
handle complex rollouts of retail signage and point of sale
materials, fulfill direct mailings that incorporate personalized
URLs, and provide customers online access to tracking
information.
Since 2004, RR Donnelley has completed acquisitions and asset
purchases in Latin America, North America, Europe and Asia.
We believe that we are uniquely qualified to assess and complete
the Acquisition given our experience in financing and executing
major transactions in the printing industry. We have a proven track
record of successful execution of complex, structured transactions,
providing you with a high degree of certainty that we can
consummate the Acquisition in a timely and efficient manner.
* * * *
This letter is not a legally-binding offer or agreement. Any
legally-binding offer or agreement will be set forth only in
definitive documentation approved by you and us.
If you have questions about our letter or would like to discuss
the next steps, please do not hesitate to contact me. You also may
contact Stefan Selig of Banc of America Securities/Merrill Lynch
& Co. (646-885-1305 or sselig@bofasecurities.com), or Andy
Dietderich at Sullivan & Cromwell LLP (212-558-3830 or
dietdericha@sullcrom.com).
In connection with our own disclosure obligations we will be
publicly disclosing this letter by filing it with the US Securities
and Exchange Commission. We also understand and appreciate that you
will want to share this letter with the many stakeholders in your
restructuring process.
We are very excited about the possibility of this transaction
and look forward to taking the next steps with you.
� � Very truly yours, � R.R. DONNELLEY & SONS COMPANY �
�
By /s/ Thomas J. Quinlan III
Name:��Thomas J. Quinlan III
Title: President and Chief
Executive Officer
� � cc: Louis J. Gouin (Ogilvy Renault LLP) � Michael J. Canning,
Esq. Neil M. Goodman, Esq. Joel M. Gross, Esq. (Arnold & Porter
LLP) � Murray A. McDonald (Ernst & Young Inc) � S. Richard Orzy
Kevin J. Zych (Bennett Jones LLP) � Ira S. Dizengoff David H.
Botter Ryan Jacobs David Staber Sarah Schultz (Akin Gump Strauss
Hauer & Feld LLP) � Audra D. Cohen Andrew G. Dietderich
(Sullivan & Cromwell LLP) � Edward Sellers Randall Pratt
(Osler, Hoskin & Harcourt LLP) � Stefan Selig (Banc of America
Securities/Merrill Lynch & Co.) �
About RR Donnelley
RR Donnelley (NYSE: RRD) is the world�s premier full-service
provider of print and related services, including business process
outsourcing. Founded more than 144 years ago, the company provides
products and solutions in commercial printing, direct mail,
financial printing, print fulfillment, labels, forms, logistics,
call centers, transactional print-and-mail, print management,
online services, digital photography, color services, and content
and database management to customers in the publishing, healthcare,
advertising, retail, technology, financial services and many other
industries. The largest companies in the world and others rely on
RR Donnelley�s scale, scope and insight through a comprehensive
range of online tools, variable printing services and
market-specific solutions.
For more information, and for RR Donnelley's Corporate Social
Responsibility Report, visit the company's web site at
http://www.rrdonnelley.com.
Use of Forward-Looking Statements
This news release may contain "forward-looking statements" as
defined in the U.S. Private Securities Litigation Reform Act of
1995. Readers are cautioned not to place undue reliance on these
forward-looking statements and any such forward-looking statements
are qualified in their entirety by reference to the following
cautionary statements. All forward-looking statements speak only as
of the date of this news release and are based on current
expectations and involve a number of assumptions, risks and
uncertainties that could cause the actual results to differ
materially from such forward-looking statements. Readers are
strongly encouraged to read the full cautionary statements
contained in RR Donnelley's filings with the SEC. RR Donnelley
disclaims any obligation to update or revise any forward-looking
statements.
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