Transcontinental To Acquire Assets of Quad/Graphics Canada

Transcontinental Inc. and Quad/Graphics Inc. have entered into a definitive agreement pursuant to which Transcontinental will indirectly acquire all the shares of Quad Graphics Canada Inc.

In a separate transaction, Transcontinental has also reached an agreement to sell its Mexican operations as well as transfer its black and white book printing business, destined for U.S. export, to Quad/Graphics. The definitive agreement has been approved by the Boards of Directors of both Transcontinental and Quad/Graphics. The transactions are subject to obtaining regulatory clearances, including under the Canadian Competition Act and the Mexican Federal Law on Economic Competition. Essentially, these transactions represent an exchange of assets. Both transactions are expected to close in the fall.

More specifically, Transcontinental will be acquiring seven of Quad/Graphics' facilities across Canada (three in Ontario, two in Quebec, one in Alberta and one in Nova Scotia), including six printing plants and one premedia facility. These operations employ 1,500 people and are forecasted to generate approximately US$310 million of revenues in fiscal 2011. Conversely, Transcontinental will be divesting its Mexican assets which consist of 900 employees in three facilities and are forecasted to generate C$67 million in revenues in fiscal 2011. Transcontinental will also be transferring its black and white book printing business, destined for U.S. export, which represents approximately C$25 million in revenues.

"The acquisition of the Canadian assets of Quad/Graphics is in line with our strategy to build on our more traditional print assets and is key to maintain a solid business going forward given the competitive and industry dynamics. It will allow us to leverage the over $700 million in investments we have made to our printing platform over the last several years. These transactions combined will generate at least $40 million in net incremental EBITDA for Transcontinental, over 12 to 24 months following the closure of the transactions," said François Olivier, President and Chief Executive Officer. "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," continued Mr. Olivier. "We thank all the employees in our Mexican operations for their dedication and outstanding contribution to the company's success," concluded Mr. Olivier.

Quad/Graphics Chairman, President & CEO Joel Quadracci said, "Our agreement with Transcontinental is compelling for many reasons. We have long recognized the high-growth potential in Mexico where we already have operations. This acquisition supports our strategy to grow profitably in geographies and segments where we can be a market leader through a diverse product offering, and a superior and efficient operating platform. To drive growth in the highly competitive Canadian marketplace would have required a substantial capital investment. Overall, Mexico is a more-compelling long-term value creation opportunity for us compared to Canada, and through this acquisition we expect to achieve solid synergies and realize our platform, earnings and market-leadership objectives."