Florham Park, N.J. – Based private equity firm GSC Partners is cashing out its entire investment in R.R. Donnelley & Sons Co., making more than 5 times its money after four years. GSC has sold 4.6 million shares to Goldman, Sachs & Co., which will sell the stock in a secondary offering. In addition, Donnelley said Monday, Jan. 3, it will buy back 5.96 million common shares from GSC for $200 million, or $33.53 per share, bringing the realization to $356 million.
GSC, which holds a 4.8% stake in Chicago-based R.R. Donnelley, stands to realize a return of around 5.5 times its original investment in the Chicago printing and publishing services business, said Matt Kaufman, a managing director at GSC Partners, formerly known as Greenwich Street Capital Partners. “We decided, [Donnelley] having been a very successful investment, that it was the appropriate time to take profits for our limited partners.”
“The share repurchase from GSC represents an opportunity for the company to accomplish the goals that led us to consider a $200 million accelerated share repurchase, but at a significant discount to market and without the pricing risk inherent in a collared buyback transaction,” said Mark Angelson, chief executive of R.R. Donnelley, in a statement.
R.R. Donnelley’s shares had declined 1.3%, to $34.84, by late afternoon Monday.
Officials from R.R. Donnelley declined to comment further until the transaction closes, which is expected to occur Thursday.
Alfred Eckert III, chairman and CEO of GSC Partners, and Robert Cummings Jr., a senior advisor to GSC Partners, recused themselves from the board’s consideration of R.R. Donnelley’s stock repurchase from GSC.
GSC Partners’ stake stems from a December 2000 investment in convertible debt of Mississauga, Ontario-based business form printer Moore Corp. GSC contributed $52 million, while a syndicate comprising Deutsche Bank AG’s DB Capital Partners, New York investment bank Berenson Minella & Co. and Chancery Lane Capital, an investment vehicle of the late financier Theodore Ammon, invested an additional $18.5 million.
GSC’s total return includes interest on that debt.
“The thesis was to take a company that was undermanaged, cut out some costs and create a platform to make other strategic acquisitions in the printing industry,” Kaufman said.
In December 2001, GSC and Chancery converted their debt into common stock of Moore. Moore subsequently acquired Wallace Computer Services Inc. in May 2003 for $1.28 billion, becoming Moore Wallace Inc. R.R. Donnelley purchased Moore Wallace last February for $2.8 billion.
Stroock & Stroock & Lavan LLP was counsel to GSC, while Sullivan & Cromwell LLP was counsel to R.R. Donnelley.