US print services giant RR Donnelley to split into three

US printing services giant RR Donnelley & Sons Co said yesterday that it intends to split its entire business into three independent publicly traded companies, in an attempt to stimulate growth.

The three companies will focus on financial communications and data services, publishing and retail print services and multichannel communications management, Donnelley said in a statement.

Donnelley's president and chief executive officer Thomas  Quinlan said, "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.''

''Each company will have the strategic focus, management resources and capital structure to enable it to strengthen its market position and pursue its growth opportunities, enhancing long-term value for stakeholders," Quinlan added.

Further to the news, shares in Donnelley went up 2.8 per cent to close at $18 yesterday on Nasdaq.

Chicago-based RR Donnelley is a leading provider of print services worldwide. Its products include magazines, catalogues, packaging, office products, labels, financial print products, digital and creative solutions.

The company's international segment includes its operations in Asia, Europe, Latin America and Canada.

Donnelley, founded 150 years ago by Richard Robert Donnelley, has grown its business through a combination of organic growth and strategic acquisitions.

Last year, Donnelley reported an 11-per cent rise in revenue at $11.6 billion. However, net profit dived 44 per cent to $117 million.

Financial results for the second quarter released yesterday posted a 5 per cent decline in sales at $2.7 billion. Net GAAP earnings were down 23 per cent at $65 million.

"Despite a challenging demand environment, we aggressively managed our cost structure to achieve a non-GAAP adjusted earnings before tax, interest, depreciation and ammortisation margin of 11.3 per cent. In addition, we are pleased with our second quarter free cash flow of $152.7 million, which represented a 65 per cent improvement from the second quarter of last year," Quinlan said.

The new financial company will have sales of about $1 billion, will serve both the investment and capital markets worldwide in the areas of content management, data management, business reporting etc through a combination of Donnelley's financial print business, Bowne Financial and Edgar Online.

Publishing and retail print services business will be approximately $3.5 billion, which will include periodicals, catalogues, books, office products etc.

The communications management company will have sales of about $7 billion. It will over digital prints, commercial printing, business process outsourcing, supply chain management, logistics, creative design, content management etc.

''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," Quinlan said.

Existing Donnelley shareholders will receive shares in the new financial and print services companies.

The spinoff is expected to close by the end of 2016, subject to customary conditions and regulatory and other approvals.

Centerview Partners LLC and BofA Merrill Lynch are serving as financial advisors to RR Donnelley on the break up.