It’s really disheartening to see a $6 billion organization
on the penny stock blogs.
I never understand why, when a company knows this type of
financial intersection is coming, they don’t act earlier – they end up doing
immense long term damage to the brand. One analyst I was reading observed it
had been a revolving door for leadership – I have to echo that. Quebecor has not
been setup culturally or structurally to either attract, retain or reward the right
people for the long term. There have been several missed opportunities as the corporate culture failed to embrace the teams that built
the operations Quebecor acquired. (I am thinking specifically of people like Marc
Reisch post-World Color).
Quebecor’s main misstep in my view was to continue to view
the US operation as if it were a collection of regional printers rather than a
national brand and an interconnected service network that had to compete on its
own in a no-holds barred marketplace. (Remember, in large contract printing this
is the NFL) - and then ham-string their managers on the front lines and force them to run everything through the head office in Montreal.
A company with that large a footprint has to be an innovator
not an imitator. One might argue that even their attempts at imitating how
other companies are reinventing themselves with outsourcing models, and new
digital strategies have fallen woefully short.
Admittedly it is hard to transform a large print operation
overnight, ask Dennis Rediker at Standard Register how hard it is: It takes vision, tenacity,
shareholder patience and money. In Quebecor’s case it could be done – but it
would be long fought effort with the level of debt and cash.
More likely is that Donnelley, alone or in partnership with
private capital would be interested in picking up the gravure operations that
are the jewel in the crown. The gravure operations have a stable of major
contract accounts and a production network that cannot be found outside
Donnelley or for that matter duplicated. Any buyer of Quebecor would have to
look beyond the somewhat antagonistic relationship that Quebecor has with some
of its union groups – but then again, a fresh start might unlock new
partnership opportunities on that front. Quad Graphics would be a heaven-sent refuge
for any Quebecor gravure plant. On the web-offset side Donnelly would find the
offset contract relationships very attractive for the major magazines and short
run-magazines and that would undoubtably engender a long process of re-locations
and plant closures to rationalize that network.
KKR or Cerberus could assemble a dream-team’ to perform an
operational recovery and part the company out over time. They did it with Bob
Burton and World Color. Cenveo is a household name now in this type of deal but
it is hard to see how if fits with their current strategies (but then again
something with that big a footprint has a deal inside it to be made somewhere).
In my
view Quebecor would find its highest value if the product groups were re-formed
and sold as smaller stand-alone units. New brand identities and operational focus could be found and then the list of potential buyers expands. Those smaller units, better staffed, better positioned and marketed (or at least understood) would generate higher collective interest – Someone
like Jim Conway at Courier Inc. has the vision and management team to buy and recover
the book operations. The Sheridan Group TSG might also be interested in the
short-run magazine/journal locations – that sort of scenario could play out across each product segment but
it would be a longer process and involve some operational ‘heavy lifting’. Few
have the stomach for that.
Wild card possibilities might include Michael Cunningham of CGI
(nowDG3), Mike is the dynamic guy that built Cunningham Graphics, CGI Worldwide
– somebody like that in partnership with a hedge fund might suddenly appear at the
table. Or perhaps the American Color investors might want to buy the Quebecor gravure
operations as a strategy to expand out of the cold-set offset and flexographic
markets that have very limited growth opportunities. (What can their strategic Board
discussions possibly revolve around in today's world?)
So for the moment, Quebecor has arm-wrestled Royal Bank to step in with some small re-financing, reportedly enticed by the future promise of fees associated with a wireless start-up Quebecor has in the works. (There is a reason hockey is the national sport). All this drama for a measly $100 million or so which still leaves the major traunche of debt still out there and no new break-through management strategies for the firm. Perhaps this gives them the room to conduct a more orderly sale if the short list of potential buyers have not already been snubbed or looked under the hood and decided this bungee-jump was not for them.
On the whole it is hard to identify a long list of entities
that might have both the balance sheet and the appetite for ‘big-iron’
manufacturing in a world that it accelerating headlong into digital delivery and Web 2.0
communication models.
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