R.R. Donnelley to Buy Consolidated Graphics

R.R. Donnelley & Sons Co. (RRD) agreed to buy fellow printing company Consolidated Graphics Inc. (CGX) in a cash-and-stock deal of roughly $620 million, expanding R.R. Donnelley's commercial printing services.

The deal, which was unanimously approved by both companies' boards, provides all total of about $62 per Consolidated Graphics share, a 2.5% discount of its Wednesday closing price. Both companies' shares have jumped over 80% so far this year.

R.R. Donnelley plans to provide $34.44 in cash and about 1.65 of its shares for each Consolidated Graphics share. The deal is expected to close in the first quarter of next year and should benefit R.R. Donnelley's adjusted earnings within 12 months after the deal is completed, the company said.

R.R. Donnelley has been grappling with weaker sales in its U.S. print and related services segment. The industry as a whole has suffered as content continues to migrate online, and R.R. Donnelley has been making moves to enhance its digital offering, in May striking a deal to provide eBook services to women's books publisher Harlequin.

Simultaneously with signing the merger agreement, Consolidated Graphics' Chairman and Chief Executive Officer Joe R. Davis entered into a voting agreement, under which he agreed to vote his shares in favor of deal. Mr. Davis is the company's largest shareholder, with a roughly 16.5% stake.

"Our customers will benefit significantly from R.R. Donnelley's broad range of printing capabilities and our combined geographic footprint," Mr. Davis said.

Separately, R.R. Donnelley released preliminary third-quarter results that came in ahead of market expectations. It is expected to book about $15 million in profit, or eight cents a share, on $2.61 billion in revenue. Adjusted earnings are expected to be 38 cents a share.

Analysts predicted 35 cents a share in earnings and $2.53 billion in revenue, according to Thomson Reuters.

R.R. Donnelley's shares closed Wednesday at $16.69, while Consolidated Graphics shares closed at $63.60. Neither stock was active premarket.

Write to Ben Fox Rubin at [e-mail]

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