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Meredith-Burda to be Sold for About $570 Million

December 22, 1989 GMT

DES MOINES, Iowa (AP) _ R.R. Donnelley & Sons Co., the leading commercial printer in North America, agreed Friday to buy the Meredith-Burda printing business jointly owned by Meredith Corp. and the Burda family of West Germany in a deal valued at about $570 million.

Meredith, a Fortune 500 company that publishes Better Homes and Gardens magazine and also has interests in television stations and real estate, said it would use its share of the proceeds to strengthen and expand its core businesses.

″It’s a continuation of a trend that’s been going on for some time. The industry is consolidating,″ said Robert A. Dunlap, who follows Donnelley for the New York Securities firm of Brown Brothers Harriman & Co.

Analysts said the deal should benefit both companies.

On the New York Stock Exchange Friday, Donnelley rose 87 1/2 cents to finish at $48.75 a share and Meredith jumped $3.37 1/2 to $35.25 a share.

Donnelley said it would pay $487.5 million in cash, to be divided between Meredith, and Franz and Frieder Burda of West Germany. It also agreed to assume $80 million in Meredith-Burda debt.

The deal, subject to government antitrust review, is expected to be closed early in 1990, the companies said. Jack Rehm, the president of Meredith, said he anticipated no objections on grounds of restraint of trade.

Donnelley, based in Chicago, accounts for an estimated 6.4 percent of the $50 billion U.S. commercial printing market and should expand its share to about 7 percent through the acquisition, Dunlap said.

Donnelley prints and binds many national publications, including Time, Newsweek, TV Guide and Business Week. It also prints telephone books, encyclopedias and school and religious books and has about 25,000 employees at nearly 100 factories and offices in the United States, Britain, Ireland, the Caribbean and Asia.

In 1988, Donnelley earned $205.3 million on sales of almost $2.9 billion.

Meredith-Burda, formed in 1969, generated $456.7 million in the fiscal year ended June 30 and employs 3,205 people nationwide, including about 1,100 in Des Moines. It has printing plants in Des Moines; Newton, N.C.; Lynchburg, Va.; and Casa Grande, Ariz. Its photo preparation centers are in Lynchburg and at Hickory and Greensboro, N.C.

Meredith-Burda also owns 40 percent of plants in Lynchburg and at Greenfield, Iowa, where Siegwerk Inc. manufactures ink.

Donnelley spokesman James Ratcliffe said there are no immediate plans for cutbacks, although some sales and administrative positions at Meredith-Burda may be eliminated in the future if they overlap with Donnelley operations.

″We did not buy this to dismantle anything,″ Ratcliffe said in a telephone interview.

Meredith, which earned $33.2 million on revenue of $792 million in the latest fiscal year, already had a working relationship with Donnelley, which prints Meredith’s Ladies’ Home Journal and SAIL magazines and several Meredith books. Rehm said Donnelley would be printing other Meredith publications, the bulk of them at the Des Moines plant.

Rehm said Meredith officials began considering the sale of the capital- intens ive printing business early in 1989 and soon began discussions with Donnelley.

″It’s a solid financial decision for our stockholders, employees, customers and communities,″ Rehm said. ″Our long-term goal and our vision for Meredith Corporation is to create growth through acquisitions and new product development. With this decision, we can focus our energy, our skills and our capital resources on our core businesses.″

Rehm said Meredith was receiving about twice the amount it had been carrying on its books as the value of the operation.

He told reporters that no decisions had been made on how to spend the money, which will be divided about evenly between Meredith and the Burdas. But he noted that acquisition opportunities in the media business tended to surface at a moment’s notice.

″If a television station came up in the foreseeable future and if we thought it was a good fit at the right price, we’d probably look at it,″ Rehm said.

He also said the company was exploring launching new magazines as well as acquiring existing publications.

″I think everybody makes out on this deal,″ Dunlap said.

Dunlap said Meredith gets out of a business that has had a low return on investment and gets some needed cash for its other operations. He said Donnelley gets plants that fill voids in its operations.

John Walter, chairman and president of Donnelley, said: ″The acquisition of Meredith-Burda by Donnelley is an outstanding opportunity for both parties. Meredith-Burda is a strong, high-quality printer with an excellent customer base and a leading market reputation. The fit with Donnelley’s existing facilities is remarkably good.″

Cornelius Sewell, who follows the printing business for Argus Research in New York, called Donnelley a consistent performer.

Sewell said Donnelley is so broad-based that it can avoid the damage that cyclical swings cause smaller printing operations.

″They’re pretty smart guys,″ he said.