RRD.WI Donnelley (R.R.) & Sons Co.

R.R.Donnelley (RRD) recently entered into a definitive agreement to acquire Canada-based Multicorpora, an international provider of translation technology solutions. However, the financial details of the deal were not made public.

MultiCorpora is exclusively dedicated to providing language technology software solutions to organizations that manage translation departments. Its flagship software product is MultiTrans Prism that is currently used by the governments of Belgium, France, Germany, and Switzerland.

European organizations such as the European Patent Office (EPO) and the Council of Europe (COE) are also its clients. Donnelley believes that the acquisition will aid in expanding its language solutions portfolio, which will boost its top-line going forward.

Currently, the company is facing a significant threat from digital technologies that enable much easier transfer, designing, resetting and reproduction of data. This affects big projects, such as books and journals, where printed pages are much higher.

Additionally, with publishers increasingly coming out with digital versions of books and sophisticated e-book readers from Amazon.com Inc. and Barnes & Noble Inc. (BKS) for reading these books becoming increasingly available, the interest in commercially printed paperbacks and hard covers is waning.

In such a scenario, Donnelley needs to expand its scope beyond this traditional business and the current acquisition is likely to take it in that direction. In the past, acquisitions have been a key growth factor for Donnelley.

In Jan, 2014, the company acquired Consolidated Graphics for a sum of $359.9 million in cash and $16.0 million worth of Donnelley share. The company also acquired Esselte Corporation, manufacturer of nationally branded and private label office and stationery products. These acquisitions are expected to boost the top-line growth going forward.

Although, Donnelley continually focuses on acquisitions and wins contracts from various companies such as Williams-Sonoma and Office Depot Inc. (ODP), the deteriorating macroeconomic conditions continue to dampen its business prospects.

Donnelley is expected to remain under pressure in the near term due to continuing pricing pressure, volatility in raw material prices, and increasing competition. Moreover increasing adoption of the e-book reader from Amazon.com (AMZN) remains a major concern for its legacy printing business.

Currently, R.R.Donnelley has a Zacks Rank #3 (Hold).
 

 
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