Canadian Printer Becomes Top Provider in Mexico

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Despite the ongoing decline in advertising sales that is dragging on the print industry, Montreal-based printing house Transcontinental is expanding with the purchase of Mexican book publisher Editorial Offset.

The announcement came late last month just days before Transcontinental posted a $32.6 million profit for its fiscal second-quarter 2002, which ended April 30. The profit is up 12 percent from the same period in 2001, despite a $10.2 million decline in revenue the company attributed to the slowdown in ad spending and lower paper prices.

The value of the acquisition was not disclosed. Editorial Offset has annual revenue of $18.5 million and employs about 350 people.

With the addition of Editorial Offset's plant in Mexico City, Transcontinental becomes Mexico's largest print provider. The company now owns three printing plants as well as a division that distributes advertising materials door-to-door, bringing its total work force in Mexico to 1,200.

Editorial Offset's plant brings a book publishing and perfect binding facility in Mexico to complement Transcontinental's existing capabilities, which include flier printing from its plant in Toluca, outside Mexico City, and magazine, brochure and direct marketing material printing from another plant in Mexico City.

The company's newest acquisition expands its assets to an industry not dependent on ad spending at a time ad spending in print media is suffering. According to CMR, a New York-based strategic advertising information provider, ad revenue for national newspapers fell 8.5 percent to $710.1 million in the first quarter of 2002 and magazine ad revenue dropped 9.62 percent to $3.29 billion.

However, Transcontinental executives said they are not reacting to the market in acquiring Editorial Offset so much as fulfilling a plan to offer as diverse an array of services in Mexico as the company offers in Canada.

In Canada, Transcontinental is a top publisher of magazines and community newspapers in addition to books, fliers, inserts and direct marketing material. The company employs about 11,000 people in Canada, Mexico and the United States, where it provides direct marketing material and short-run book printing.

"It's not a defensive move," Daniel Denault, vice president and chief financial officer of Transcontinental, said of the Editorial Offset acquisition. "It's a move to expand significantly."

The company intends to acquire facilities in three or four more cities in Mexico, Denault said. He declined to specify which cities Transcontinental has its eye on.

Transcontinental also announced plans to expand Editorial Offset's capabilities with the addition of a new Harris 850 web press.

"Our goal in Mexico is to become the leader in these niches across the board," Denault said.

Editorial Offset is Transcontinental's fifth acquisition this year. Just two weeks before buying Editorial Offset, Transcontinental added a second Sanden 8-Color Quantum 1500 web press to serve its Transcontinental Interactive division in the Philadelphia area.

Other acquisitions this year include: three Canadian plants from Gesca Ltd.; the O'Keefe Group with two high-end commercial sheetfed plants in Montreal and Toronto and 200 employees; and Winnipeg-based Coronet/Fahlke Printers Ltd. with 40 employees.

Transcontinental has been able to continue its acquisition strategy despite falling ad revenue because of its low debt load, Denault said. As of the end of its fiscal second-quarter 2002, Transcontinental had assets of $1.34 billion and net indebtedness of $261.4 million, down from $385.9 million in the same period in 2001.


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