Quad/Graphics’ $1.4 Billion Acquisition of LSC Communications

Quad is advised in this transaction by J.P. Morgan Securities LLC, BDT & Company and Foley & Lardner LLP. LSC Communications is advised by BofA Merrill Lynch and Sullivan & Cromwell LLP.

Quad/Graphics, Inc. (NYSE: QUAD), a leading marketing solutions provider, and LSC Communications, Inc. (NYSE: LKSD), a leader in print and digital media solutions, have approved a definitive agreement whereby Quad will acquire LSC Communications in an all-stock transaction valued at approximately $1.4 billion, including the refinancing of LSC Communications’ debt. As of September 30, 2018, the combined company would have had annual revenue of approximately $8 billion.

Under the terms of the agreement, LSC Communications shareholders will receive 0.625 shares of Quad Class A common stock for each LSC Communications share they own, representing approximately 29 percent total economic ownership of the combined company and approximately 11 percent of the vote of the combined company. Based on the closing share prices of both companies on October 30, 2018, the merger consideration represents a premium of 34 percent to LSC Communications shareholders. Quad shareholders will continue to own Class A and Class B shares, representing approximately 71 percent total economic ownership of the combined company and approximately 89 percent total voting power of the combined company. The transaction supports Quad’s long-term strategic vision by preserving the Quadracci Family leadership and voting control in the company.

Quad expects the transaction to be accretive to earnings, excluding non-recurring integration costs. Net synergies are expected to be approximately $135 million, and will be achieved in less than two years, through the elimination of duplicative functions, capacity rationalization, greater operational efficiencies and greater efficiencies in supply chain management that will also benefit our clients.

Joel Quadracci will be Chairman, President and Chief Executive Officer of the combined company. Quad will expand its board of directors to include two members from LSC Communications’ existing board.

The transaction is expected to close in mid-2019, subject to approval by Quad and LSC Communications shareholders, regulatory approval and other customary closing conditions.

The Quadracci Family Voting Trust, holder of approximately 64 percent of the voting power of Quad’s outstanding common stock, has entered into a voting agreement with LSC Communications pursuant to which it will vote in favor of the issuance of shares in connection with the transaction.

The closing of the transaction is not contingent on financing. Quad has secured a financing commitment from JPMorgan Chase Bank, N.A. to refinance Quad’s existing credit facility and LSC Communications’ outstanding debt.

Foley & Lardner LLP represented Quad/Graphics Inc. with a team including Russell Ryba (Picture) Patrick Quick, James McKeown, Tim Voigtman, Jamshed J. Patel, Heidi Furlong, Richard Dancy, Benjamin Dryden, Joshua Agen, Garrett Bishop and Tolani Odutayo.

Sullivan advised LSC Communications with a team led by Audra Cohen.

 

Involved fees earner: Garrett Bishop – Foley & Lardner LLP; Richard Dancy – Foley & Lardner LLP; Tolani Odutayo – Foley & Lardner LLP; Russell Ryba – Foley & Lardner LLP; Patrick Quick – Foley & Lardner LLP; Joshua Agen – Foley & Lardner LLP; Timothy Voigtman – Foley & Lardner LLP; Benjamin Dryden – Foley & Lardner LLP; James McKeown – Foley & Lardner LLP; Heidi Furlong – Foley & Lardner LLP; Jamshed Patel – Foley & Lardner LLP; Audra Cohen – Sullivan & Cromwell;

Law Firms: Foley & Lardner LLP; Sullivan & Cromwell;

Clients: Quad/Graphics, Inc.; LSC Communications Inc.;