RR Donnelley Agrees to $2.1 Billion Offer From Atlas Holdings, as Potential Bidding War Ensues

North America's largest commercial printing conglomerate RR Donnelley & Sons (RRD) announced this morning that it has entered into a definitive merger agreement to be acquired by affiliates of Atlas Holdings in an all-cash transaction with a total enterprise value of approximately $2.1 billion.

The transaction is expected to close in the first half of 2022, subject to customary closing conditions, including approval by RRD stockholders and receipt of regulatory approvals. Upon completion of the transaction, RRD’s shares will no longer trade on The New York Stock Exchange and Chicago-based RRD will become a private company.

Headquartered in Greenwich, Connecticut, Atlas Holdings is certainly no stranger to the printing and packaging industry. Atlas and its affiliates already own book and publication printing powerhouse LSC Communications, Finch Paper, Twin Rivers Paper, and Millar Western. It is also currently in negotiations to acquire coated paper manufacturer Verso Corp., after making an unsolicited $20 per share takeover bid on July 11, 2021.

The acquisition agreement with Atlas Holdings has been unanimously approved by RRD’s board of directors. Under the terms of the merger agreement, Atlas will acquire all of the outstanding shares of RRD common stock, and RRD stockholders will receive $8.52 per share in cash for each share of RRD common stock. The purchase price represents a premium of approximately 29.1% over RRD’s closing price on Nov.2, 2021, approximately 72.8% over RRD’s closing share price on Oct.11, 2021, the last trading day prior to the announcement of a non-binding offer by Chatham Asset Management, LLC, and a premium of approximately 64.1 percent over RRD’s 60-day volume weighted average price for the period ended October 11, 2021.

John C. Pope, RRD chairman

“The RRD board regularly reviews the company’s strategic priorities, and today’s announcement is a culmination of a thorough, multi-year process to maximize value for RRD stockholders,” John Pope, RRD chairman of the board of directors, said in a prepared statement. “After a careful and thorough analysis, the RRD board believes that this transaction, which delivers an immediate premium and certain cash value, is in the best interest of RRD and our stockholders.”

Atlas intends to finance the transaction through a combination of committed equity financing provided by affiliates of Atlas, as well as debt financing that has been committed to by JPMorgan Chase Bank, N.A. and Macquarie Capital. The transaction is not subject to a financing condition.

Under the terms of the merger agreement, RRD may solicit additional acquisition proposals from third parties for a period of 25 calendar days from the signing of the merger agreement. RRD’s board of directors, with the assistance of its advisors, intends to solicit acquisition proposals during this period. According to RRD, there can be no assurances that the solicitation process will result in any acquisition proposals or any alternative transaction.

Potential Bidding War Between Atlas and Chatham

One proposal already on the table is from RRD's largest bondholder and major shareholder —Chatham Asset Management — which has upped its previous offer of $7.50 per share in an all-cash deal to $9 to $9.50 per share. Anthony Melchiorre, managing member of Chatham, wrote a letter to RRD's board of directors upon learning of the competing Atlas offer:

On Oct.12, 2021, Chatham Asset Management, LLC, the largest stockholder and debt holder of R.R. Donnelley & Sons (RRD), submitted a non-binding proposal to acquire all of the common stock of RRD not already owned by Chatham at a price equal to $7.50 per share (the “Original Offer”). Our Original Offer not only included a highly confident letter from Jefferies Group LLC supporting our ability to finance the transaction, but also contemplated a plan to equitize and/or subordinate our debt position which would significantly deleverage the company.

Since we submitted our Original Offer, we have expended significant time and resources trying to execute a non-disclosure agreement to begin discussions with the company regarding our offer. We also have increased our ownership of the company’s outstanding debt, to an aggregate of approximately $654.4 million, as further evidence of our commitment to achieving a successful and value-maximizing transaction.

Despite these efforts, the board refused to engage with us. We now have learned, through a leaked story to the Wall Street Journal, that RRD is prepared to announce a definitive agreement with Atlas Holdings (“Atlas”) later this morning, whereby Atlas will acquire RRD’s outstanding stock for $8.50 per share. The board’s decision to sign a definitive agreement with Atlas, that may include a substantial break-up fee, without any conversation with us regarding our Original Offer raises major concerns. We question how the board could have undertaken a credible and fulsome strategic review process without any discussion or evaluation of our offer.

While we remain deeply troubled by the board’s conduct to date, we remain committed to acquiring RRD and are prepared to increase our offer to $9.00 to $9.50 per share in cash if we can immediately execute a confidentiality agreement, conduct appropriate due diligence, and commence good faith negotiations with the company.

We urge the board to fulfill its fiduciary obligations and immediately reengage with us so that RRD stockholders can receive superior value for their shares. Short of that, we must reserve all rights to protect our investment.

Dan Knotts, RRD President and CEO

Despite the competing offer from Chatham, RRD and Atlas executives remain committed to consummating the agreement. “Today’s announcement represents an exciting next phase of RRD’s journey,” Dan Knotts, RRD president and CEO, indicated in a statement. “This transaction is truly a testament to our talented employees, whose passion for and dedication to serving our clients has helped build our company into the industry-leading marketing and business communications company we are today. Under our new ownership structure, they will have access to even more career-building opportunities in the future.”

Tim Fazio, Atlas co-founder and managing partner, agrees. “We are excited to have reached this agreement to acquire R.R. Donnelley and Sons, an iconic name in the business communications, marketing, and printing industries. Atlas is a trusted partner for businesses that have both a demonstrated record of innovation and customer service and, at the same time, clear opportunities for continued growth. That is precisely what we see in RRD. We look forward to working with RRD’s talented and experienced team and welcoming RRD’s associates into the Atlas family."

But, if Chatham Asset Management has its way, RRD and Atlas Holdings will never reach the alter in their proposed coupling.