Investments in new equipment and other capital goods fell -7% from $2.63 billion to $2.44 billion after adjustment for inflation. Investment in used equipment and capital goods represented 12% of total capex. The $340 million in purchases was up +26% compared to 2013, and was at the highest level since 2009. At that time, the used capital equipment and goods were $460 million. The recession flooded the market with used equipment. Much of that equipment was “young” and represented good bargains for many healthy printing businesses. In 2014, it is believed that the amount was bolstered by industry consolidation and especially tuck-ins. That kind of consolidation deal orphans much equipment to auctions and bankruptcy auctions. The second half of 2014 was also the time that industry shipments started their rise with favorable comparisons to the prior year, now going on for 21 months.
ALJ Regional Holdings (OTC Markets: ALJJ) has announced that it has entered into a purchase agreement to acquire all of the outstanding capital stock of Phoenix Color from Visant Corp. Phoenix Color is a leading manufacturer of book components, educational materials and related products with over 30 years of print experience, and has reported a $88 million in revenue for the 12 months ended March 31, 2015. Drawing on a broad spectrum of materials and decorative technologies, Phoenix Color produces memorable, value-added components, heavily illustrated books and specialty commercial products. The acquisition is scheduled to close no later than Oct. 5, 2015, subject to customary closing conditions, including the receipt of debt financing and applicable consents and approvals.
The acquisition expands ALJ’s revenue from $190 million to $278 million, expands ALJ’s EBITDA from $18.9 million to $41.8 million and, together with the other transactions, increases EPS from $0.45 to $0.66 on a pro forma basis for the twelve months ended March 31, 2015.
“Phoenix Color has been servicing the publishing industry within the United States for over 30 years and has formed lasting relationships with some of the biggest names in book publishing,” said Jess Ravich, ALJ’s executive chairman. “In addition, it is either the #1 or #2 market leader in the primary categories in which it competes. We are excited to add Phoenix Color to our family of market-leading companies under ALJ.” ALJ currently owns Faneuil Inc. and Floors-N-More, dba Carpets N’ More.
The aggregate consideration for the acquisition, subject to certain closing adjustments, will be $90 million. ALJ expects to enter into a $95 million term loan and a $30 million revolver with Cerberus Business Finance. The proceeds of such facility together with the proceeds from the sale of ALJ stock described below will be used to fund the acquisition and refinance the outstanding obligations of ALJ, Faneuil and Carpets and to provide working capital facilities to all three of ALJ’s subsidiaries.