When R.R. Donnelley & Sons announced its second quarter 2015 results (sales of $2.7 billion, down 5.3% from last year), it also announced that the company is planning to split itself apart, creating three independent publicly traded companies. The deal is expected to go completed by the end of 2016.
 
This strategy does occur occasionally. HP announced last year that it was breaking into two companies. In a noteworthy example, eBay is spinning off PayPal later this year. It makes sense, as PayPal has become a larger company than its parent corporation, and with its own leadership in place, the company can be more flexible in its operations. EBay can in turn focus on its core business.
 
The three businesses that R.R. Donnelley s creating are:
• Financial Communications Services Company (FinancialCo),
• Publishing and Retail-Centric Print Services Company (PRSCo).
• Customized Multichannel Communications Management Company (CMCo).
 
FinancialCo is set to become a financial communications services company offering content management, multichannel content distribution, data management and analytics, collaborative workflow and business reporting tools and translations services. It is largely derived from R.R. Donnelley’s acquisitions of Bowne Financial and EDGAR Online. Although it is the smallest of the three new entities, it is rather sizable, with approximately $1 billion on sales in the last 12 months.
 
PRSCo will be focused on the publication and commercial markets, including periodicals, catalogs, inserts, books, office products and directories. Its sales for the past 12 months are nearly $3.5 billion.
 
With approximately $7 billion in sales in the past 12 months, CMCo is more in tune with digital and custom operations, including direct mail, labels, packaging, statements and short-run commercial printing, as well as design and logistics.
 
Why is the company splitting itself up? Shareholder value is usually the key to these kinds of moves.
 
“We see a significant opportunity to unlock value by allowing these three businesses to pursue their own strategies and invest according to the unique dynamics of their respective industries,” said Thomas J. Quinlan III, RR Donnelley’s president and CEO. “Creating three independent companies will allow each to more quickly capitalize on opportunities created by continued technological innovation and globalization within the markets they serve.”
 
For example, according to RRD, PRSCo will look to increase value through cost restructuring and acquisitions. CMCo will be targeting customized multichannel communications.
 
R.R. Donnelley is a nearly $11.5 billion company, but a company that size sometimes lacks flexibility and focus. Breaking the company up into three cohesive pieces appears to be a good strategy for adding value in the coming years.