Canadian Magazine Industry News
13 July 2011,     MONTREAL
Transcontinental acquiring seven Quad Graphics printing locations
In another momentous move for the Canadian print industry, Transcontinental Inc. is acquiring the Canadian assets of U.S.-based Quad/Graphics, including seven printing facilities, while selling its Mexican assets to Quad/Graphics.

Transcontinental made the announcement earlier today that it will be acquiring the Quad/Graphics' facilities across Canada, including six printing plants and one premedia facility. Those facilities are in Aurora, Concord, and Markham in Ontario; Lasalle and Montreal in Quebec; Edmonton in Alberta and Dartmouth in Nova Scotia.

The operations employ 1,500 people and are forecasted to generate approximately US$310 million in revenue during the fiscal 2011, according to Transcontinental.

But senior management of Transcontinental is being tight-lipped so far about plans for the new acquisitions going forward.

"We want to take time to make sure we understand the (Quad) operation," said François Olivier, president and CEO of Transcontinental, during a conference call today. "We will come back with a firmer plan."

In a release, Olivier stated, "The print markets in general have suffered from overcapacity and more intense competitive pressures in certain niches in recent years, with the proliferation of digital and web communication platforms, technological advances in new printing presses as well as the entry of U.S. players in the Canadian marketplace. These transactions will permit us to improve our capacity utilization rate and better equip us to face these new challenges."

In a separate transaction, Transcontinental will sell its Mexican operations and transfer its Canadian black and white book printing business, destined for U.S. export, to Quad/Graphics.

Transcontinental currently employs approximately 900 people among its three facilities in Azcapotzalco, Toluca and Xochimilco, Mexico, and forecasts to generate approximately US$70 million of revenues for the fiscal year 2011, noted Quad in a release. “By acquiring Transcontinental’s Mexican assets, we will become the leading producer of magazines, retail inserts and catalogs in Mexico,” said Tony Scaringi, newly-named president and general manager of Latin America.

Transcon's black and white book printing business, destined for U.S. export, represents about $25 million in revenues.

Olivier added the combined transactions will generate at least $40 million in net incremental EBITDA (earnings before interest, taxes, depreciation and amortization) for Transcontinental, over 12 to 24 months following the closure of the transactions.

There is no cash changing hands in the transaction, said Olivier.

The transactions are subject to obtaining regulatory clearances, including under the Canadian Competition Act and the Mexican Federal Law on Economic Competition.

If the deals are approved, as expected, Transcontinental will cement its position as the dominant heatset and coldset web printer in Canada. Stay tuned for more news and analysis.

— Jeff Hayward
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