RR Donnelley plans three-way split

By Jo Francis, Thursday 06 August 2015

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Bigger is no longer better for RR Donnelley – the giant printing and communications conglomerate has decided to break itself up into three separate businesses.

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RR Donnelley: 150-year history

The US-headquartered group, which employs 68,000 staff and had sales of $11.6bn (£7.5bn) last year, has announced a “transformative separation” that will see it split into three standalone businesses that will each be publicly traded entities.

The three new proposed businesses are: CMCo (Customised Multi-Channel Communications Management Company); PRSCo (Publishing & Retail-Centric Print Service Company); and FinancialCo (Financial Communications Services Company).

President and chief executive Tom Quinlan said the group had, over the past decade, acted to strengthen every part of its business. “Through a combination of organic growth and strategic acquisitions, we built three businesses that individually offer the scale and expertise to excel,” he stated.

“This will accelerate what needs to happen for our customers. It will be good for our customers and for our sales people,” he added. “First and foremost the most important thing is, whatever we do is going to be seamless to customers.”

The group’s string of acquisitions over the period included Moore Wallace, Banta, Bowne, Edgar Online, CGX, Courier Corporation, and, most notably in the UK, the $990m acquisition of Astron in 2005.

CMCo will be the biggest operation. RR Donnelley said it had sales equivalent to $7bn in the 12 months to 30 June. CMCo includes business process outsourcing, logistics, and variable printing including commercial and digital print. EBITDA margin was described as “high single digits”.

PRSCo, which includes books, magazines and catalogues, inserts, and directories had sales of $3.5bn and “low double digit” EBITDA margin.

The smallest operation is $1bn turnover FinancialCo, although it has the highest EBITDA margin, put at “between the high teens to low twenties”. Its services include financial compliance, transactions and investor communications.

In the UK, RR Donnelley has three operations: £215m-turnover BPO business RR Donnelley Global Document Solutions Group; £28.3m-turnover RR Donnelley UK Directory, which includes the Flaxby Moor print site in Yorkshire; and £26m-turnover financial print wing RR Donnelley (UK).

It will take time to complete the complex transactions involved in separating out the three businesses, and RR Donnelley expects to complete the process before the end of next year. Its existing shareholders will own shares in all three companies.

“All three companies will be capitalised with strong balance sheets,” the firm stated.

RR Donnelley also has to iron out the details about what happens to the group’s $610m of underfunded pension obligations. 

Details about the leadership and branding for each company are still to be decided.

Quinlan said he did not see any immediate need to recruit additional management resources to handle the transition. “We believe we’ve got the talent and bench strength here, and have the team in place to go ahead and do this.”

RR Donnelley was founded by Richard Robert Donnelley. The firm celebrated its 150th anniversary last year.

Its share price jumped by almost $1, from $17.51 to $18.44 after the plans were announced, but had fallen to $16.98 at the time of writing (52-week high: $20.22, low: $14.32).

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