The thinking a little while back was that the field of book publishing was soon going to go the way of the dinosaur. In other words, books would be replaced by eReaders, etc.
 
However, book publishing remains healthy, and apparently a target for acquisitions as the battle for Courier Corporation between publishing printing industry heavyweights R.R. Donnelley (RRD) and Quad/Graphics shows, and the resulting battle offers insights into the road ahead.
 
“Quad and R.R. Donnelley were eventually going to collide,” an ink industry leader said.
 
Here’s the background: The second-largest book publisher in the U.S., Courier specializes in educational, religious and trade publications. The company utilizes a combination of offset and digital printing, the latter of which it uses to customize educational books.
 
For fiscal year 2014, ending Sept. 27, 2014, Courier reported sales of $283 million, up 5% from 2013; its EBIDTA was $42 million, which was unchanged from 2013. Education is the largest section of its business at 41%; trade publications make up 31%, and religious publications, including millions of Bibles and Testaments, accounts for the remaining 28%.
 
Courier caught the interest of Quad/Graphics, which has been making a heavy push into book printing. Quad is the second largest publication printer, with more than $4 billion sales annually. On Jan. 14, 2015, Quad announced that it is transforming its book business, and is planning on adding 20 or more HP high-speed color digital web presses. The goal is to turn book printing into a just in time, zero inventory business. “With this investment in digital presses and integrated systems, we can support a broad industry transition to a print-on-demand, zero-inventory model,” said Joel Quadracci, Quad/Graphics chairman, president and CEO.
 
This is where Courier comes in. Two days later, Quad and Courier announced a definitive agreement by which Quad/Graphics would acquire Courier for approximately $260 million.. Quad/Graphics would pay Courier shareholders the equivalent of a total purchase price of $20.50 per share, consisting of cash and shares of Quad/Graphics Class A common stock. Both companies’ boards approved the deal.
 
The largest global printer, with an estimated $11.6 billion in sales in 2014, R.R. Donnelley apparently liked what it saw as well, and decided it, too, wanted Courier. On Jan. 27, RRD’s offer for Courier, at a price of $23 per share (Quad’s was $20.50), went public. The next day, the Courier board termed the RRD offer the “Superior Proposal,” and on Feb. 5, terminated the Quad agreement and signed a definitive agreement with RRD.
 
While Courier would have accelerated Quad’s efforts in the book publishing business, Quadracci said Quad’s offer for Courier was a fair one, and the company will continue its move into books.
 
“We continue to believe our offer to Courier was compelling,” said Quadracci. “However, when it comes to spending our capital, we maintain a disciplined approach and, therefore, did not submit a revised offer… Our focus remains on transforming our book platform through the rapid implementation of digital press technology that will give publishers increased customization and versioning capabilities; faster time-to-market; reduced waste, inventories and obsolescence; and lower fixed costs.”
 
For ink manufacturers, the deal itself is of some importance. Quad manufactures its own offset, gravure and digital inks, which Ink World estimates at $300 million worth annually, and would likely bring its production in-house. R.R. Donnelley does not produce its own inks. However, if there is more consolidation in the works, and more head-to-head battles between the two industry leaders, that will have a major impact on the publication and commercial ink sector.