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Tue, Nov 20, 2018 18:47
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Management Side
Quad/Graphics to Acquire LSC Communications in All-Stock Transaction

SUSSEX, Wisconsin (News release) -- Quad/Graphics, Inc. and LSC Communications, Inc. announced that their boards of directors have approved a definitive agreement whereby Quad will acquire LSC Communications in an all-stock transaction valued at approximately $1.4 billion, including the refinancing of LSC Communications' debt. As of September 30, 2018, the combined company would have had annual revenue of approximately $8 billion.

STRATEGIC AND FINANCIAL RATIONALE

• Creates a highly efficient print platform to fuel Quad's 3.0 transformation and strengthen the role of print in a multichannel media world. Quad's 3.0 strategy creates more value for all stakeholders by leveraging a strong print foundation as part of a much larger, more robust integrated marketing solutions offering, and the transaction will broaden Quad's client base and revenue-generating potential.

• Delivers cost- and time-saving opportunities for clients through: ◦ Enhanced production and distribution efficiencies and flexibility from the greater scale of the combined complementary platforms.

◦ Expanded logistics services and volume-driven postage savings programs, such as co-mailing, backed by experienced and proven leadership.

◦ Strengthened print management services and business process outsourcing.

• Maintains long-term strategic vision by preserving Quadracci Family leadership and voting control in the company; Joel Quadracci will be the Chairman, President and Chief Executive Officer of the combined company.

• Is expected to close in mid-2019, and be accretive to earnings, excluding non-recurring integration costs. Net synergies are expected to be approximately $135 million, and will be achieved in less than two years and result in substantial additional Free Cash Flow generation.

• Results in a more profitable company with a strong and healthy balance sheet that provides continued financial flexibility to strategically deploy capital between investing back into the business, making strategic acquisitions and returning capital to shareholders through consistent dividends and share repurchases.

"This is a defining moment in Quad's 47-year journey," said Joel Quadracci, Quad/Graphics Chairman, President & CEO. "We have grown from a printer with a single facility to a global marketing solutions provider with a seamless, integrated offering that creates more value for all our stakeholders at a time of significant media disruption. Together with LSC Communications, we will create a compelling combination of talent, expertise and client technology to further fuel our Quad 3.0 marketing solutions transformation and strengthen the role of print - a proven and trusted media form in today's multichannel world."

Quadracci continued: "We look forward to welcoming LSC Communications' employees to our team. They will be part of a dynamic, values-based organization that is focused on creating a better way for our clients and our company. From this historic business combination, our clients will benefit from a highly efficient print platform, and the additional cost- and time-saving opportunities generated from enhanced production and distribution efficiencies and flexibility, expanded mailing and logistics services, and strengthened print management services. We are confident in the synergies we will generate from this transaction. We will draw on our deep integration experience to successfully align our operations and create long-term sustainable shareholder value. In addition, with an all-stock transaction, our combined shareholders will benefit from our continued strong and healthy balance sheet."

Thomas J. Quinlan III, LSC Communications Chairman, Chief Executive Officer and President, said: "Since becoming a standalone public company at the end of 2016, LSC Communications has added critical scale, capabilities and technologies. We have done so through acquisitions and divestitures as we work to strengthen our position as a leading innovator in print and multichannel logistics. We are now taking the next major step in our evolution. Together with Quad, we will be better positioned in the dynamic industry environment to efficiently serve our clients though a broader set of offerings to help meet and manage their needs. We are pleased that LSC Communications' shareholders will benefit from the significant projected synergies as well as the potential upside enabled by ownership in the combined company. We at LSC Communications are proud of what we have accomplished, and with Quad we look forward to continuing to build on our rich history of providing clients with innovative industry leading solutions."


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