Much like a sports deal, Transcontinental Inc. has made a trade with rival Quad/Graphics Inc. south of the border. With new assets in their portfolios, both companies believe they're better suited for a championship run.
For Transcontinental, the deal allows the printer to focus on its Canadian operations at a time when its home market is getting much more competitive, making it easy to lose business. To do that, the company has had to sell off almost all of its assets outside of our borders, the latest of which is in Mexico, thereby decreasing the company's global diversification.
In the latest deal, Transcontinental is picking up Quad Graphics Canada Inc, which is forecasted to drum up $310-million (U.S.) in revenue in 2011, while Transcontinental will send its Mexican assets to Quad/Graphics, which have forecasted revenues of $67-million in 2011.
"We want to strengthen our position with the increased competition here in Canada," chief executive officer François Olivier said on a conference call. "We need to make sure we are equipped to compete with the regional and Canadian printers here."
But that doesn't meant Transcon didn't like its Mexican asset. It's just that holding onto it didn't make much strategic sense. And to get Quad/Graphic's Canadian operations, Transcon had to offer up something in return.
"We liked the Mexican asset," Mr. Olivier said, citing strong points such as a good leadership team. The Mexican operation was also the leading printer in that country. However, "when you get something, you have to give something back."
From Quad/Graphics' point of view, it makes sense to fold the Mexican assets into its existing operations in that area of the world. Although Transcon tried to expand in Mexico and South American, Quad/Graphics already had a bigger presence there and Transcon's efforts were pretty much futile.
Here in Canada, Transcon will acquire seven Quad/Graphics facilities, six of which are printing plants. That ties into Transcon's current plan to build up its traditional print assets.
Last year, Quad/Graphics acquired Montreal-based Worldcolor – formerly Quebecor World – in a deal initially valued at about $1.2-billion (U.S.).