LSC, Quad/Graphics end merger plans

Daily Herald Staff Report

Printing and digital media companies LSC Communications and Quad/Graphics announced Tuesday they will abandon the plans to merge in the wake of antitrust lawsuit filed by the U, S. Justice Department.

Thomas J. Quinlan, president, chairman and CEO of Chicago-based LSC, said in a statement the two companies mutually agreed to end the merger instead of fighting the federal lawsuit

"We disagree with the DOJ's conclusion regarding our transaction, especially in the context of industry trends," Quinlan said in a statement, "However, we and Quad recognize the significant additional time and resources that would be required to challenge the DOJ's complaint and have therefore decided mutually that it is in the best interests of our respective companies to terminate the merger agreement."

Wisconsin-based Quad/Graphics announced in October 2018 it would acquire LSC in a $1.4 billion stock transaction, making the new company the largest in the printing industry. The Department of Justice filed an antitrust suit last month in the U.S. Court for the Northern District of Illinois, claiming the merger would create a monopoly in magazine, catalog, and book printing services, "denying publishers and retailers throughout the country the benefits of competition that has spurred lower prices, improved quality, and greater printing output."

Quad/Graphics will pay LSC a termination fee of $45 million as a result of the action.

Quilian also said LSC's magazine and catalog printing division has seen "an unprecedented drop in demand" that - with the merger termination - will affect the company's second quarter results. As a result, LSC's board of directors will suspend dividend payments and allocate the money to reduce debt and operational restructuring.

"We believe our ongoing operational restructuring programs, the $45 million break up fee being paid by Quad and the suspension of the dividend provide LSC with stable financial ground to move forward in our increasingly competitive and evolving industry," he said.