RRD to be acquired by LSC owner

Richard Stuart-Turner
Wednesday, November 3, 2021

RR Donnelley & Sons (RRD) is set to be acquired by affiliates of Atlas Holdings and go private in an all-cash deal worth around $2.1bn (£1.54bn).

Shares in RRD were up by nearly 40% in premarket trading
Shares in RRD were up by nearly 40% in premarket trading

The definitive merger agreement, which was announced today (3 November) has been unanimously approved by the US-headquartered marketing solutions and business services group’s board of directors.

It is expected to close in the first half of 2022, subject to customary closing conditions, including approval by RRD stockholders and receipt of regulatory approvals.

Upon completion of the transaction, RRD’s shares will no longer trade on The New York Stock Exchange and RRD will become a private company.

Under the terms of the deal Greenwich, Connecticut-headquartered Atlas Holdings, which operates a raft of manufacturing and distribution businesses globally, will acquire all of the outstanding shares of RRD common stock, and RRD stockholders will receive $8.52 per share in cash for each share of RRD common stock.

The purchase price represents a premium of approximately 29.1% over RRD’s closing price yesterday (2 November), and approximately 72.8% over RRD’s closing share price on 11 October, the last trading day prior to the announcement of a non-binding offer by private investment firm Chatham Asset Management.

It also represents a premium of approximately 64.1% over RRD’s 60-day volume weighted average price for the period ended 11 October 2021.

“The RRD board regularly reviews the company’s strategic priorities, and today’s announcement is a culmination of a thorough, multi-year process to maximise value for RRD stockholders,” said John Pope, RRD chairman of the board of directors.

“After a careful and thorough analysis, the RRD board believes that this transaction, which delivers an immediate premium and certain cash value, is in the best interest of RRD and our stockholders. We look forward to working with Atlas to complete this value enhancing transaction.”

RRD president and chief executive officer Dan Knotts added: “Today’s announcement represents an exciting next phase of RRD’s journey. This transaction is truly a testament to our talented employees, whose passion for and dedication to serving our clients has helped build our company into the industry leading marketing and business communications company we are today.

“Under our new ownership structure, they will have access to even more career building opportunities in the future.”

Earlier today, prior to the Atlas Holdings acquisition announcement, Chatham Asset Management, RRD’s biggest investor, had increased its offer to buy the remaining shares of the company for $9 to $9.50 per share in cash, up from its October offer of $7.50 per share in cash.

Tim Fazio and Andrew Bursky started Atlas Holdings in 2002 with the purchase of a small paper mill in Indiana that employed 85 people.

The company and its affiliates now own and operate 23 platform companies which employ approximately 40,000 people across more than 250 facilities worldwide and generate approximately $10bn in revenues annually.

RRD was created by the three-way split of the 'old' RR Donnelley & Sons group in 2016 where the LSC Communications and Donnelley Financial Solutions operations were spun off into separate entities. LSC Communications was acquired by Atlas Holdings last year.

Atlas co-founder and managing partner Fazio said: “Atlas is a trusted partner for businesses that have both a demonstrated record of innovation and customer service and, at the same time, clear opportunities for continued growth.

“That is precisely what we see in RRD. We look forward to working with RRD’s talented and experienced team and welcoming RRD’s associates into the Atlas family.”

Atlas intends to finance the transaction through a combination of committed equity financing provided by affiliates of Atlas as well as debt financing that has been committed to by JPMorgan Chase Bank, N.A. and Macquarie Capital. The transaction is not subject to a financing condition.

RRD said that under the terms of the merger agreement it may solicit additional acquisition proposals from third parties for a period of 25 calendar days from the signing of the merger agreement.

The company’s board, with the assistance of its advisors, intends to solicit acquisition proposals during this period and the company said it “advises that there can be no assurances that the solicitation process will result in any acquisition proposals or any alternative transaction”.

It does not intend to disclose developments with respect to this solicitation process “unless and until it determines it is appropriate to do so, subject to the terms of the merger agreement”.

RRD also reported its Q3 financial results today, which showed net sales up by 6.4% on Q3 2020 to $1.27bn. The company said it is withdrawing the previous financial guidance and has suspended any further updates as a result of the pending merger agreement.

Prior to the pandemic, RRD had put in place a so-called 'poison pill' arrangement aimed at preventing anyone acquiring “undue influence or control” of the company without board approval.

Shares in the business were up by nearly 40% in premarket trading today to $9.23.

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