R.R. Donnelley sweetens non-binding offer for Quebecor World assets

By Caroline Salls

Pittsburgh, June 8 - Quebecor World, Inc. has received a revised non-binding proposal from R.R. Donnelley & Sons Co. for the proposed purchase of substantially all of Quebecor World's assets that increases the cash and stock portions of the proposed purchase price, according to an 8-K filed Monday with the Securities and Exchange Commission.

According to the June 8 letter to Quebecor World lead director Alain Rhéaume and president and chief executive officer Jacques Mallette from R.R. Donnelley president and chief executive officer Thomas J. Quinlan III, R.R. Donnelley's May 12 proposal has also been revised to include the assumption of significant pension liabilities and a commitment to work with Quebecor to avoid any inefficient tax characterization.

The revised proposal calls for a purchase price of $800 million in cash and cash on the balance sheet estimated at $335 million as of June 30, for $1.135 billion in total cash to the estate. Quinlan said in the letter that the total cash to the estate is $476 million more than the net cash to the estate called for under Quebecor World's plans.

The cash consideration has been increased by $178 million from the original proposal, including $100 million in cash and an additional $78 million on the balance sheet.

The purchase price under the revised proposal also includes 30 million shares of R.R. Donnelley common stock, which represent approximately 15% of that company's outstanding shares and have a value of $415.8 million based on the closing trading price on June 5.

The stock consideration has increased in value by $21.6 million under the revised proposal, according to the letter.

Quinlan said the revised purchase price also includes assumption of the sponsorship of Quebecor's tax-qualified single employer defined benefit pension plans and assumption of the obligation to contribute to the multiemployer defined benefit pension plans in the United States and Canada, for which the underfunding liability as of Dec. 31 is at least $275 million.

R.R. Donnelley has also offered to pay 50% of the related costs if Quebecor World is forced to seek a debtor-in-possession facility extension or forbearance to give it more time to complete the proposed sale.

In addition, R.R. Donnelley said it has conducted due diligence in connection with pension, labor and tax matters, and has received input and comments on its previous proposal from Quebecor and some of its creditors.

Quinlan asked Quebecor World in the letter to let him know by the close of business on Wednesday if it is still interested in the R.R. Donnelley proposal.

Quebecor World, a Montreal-based printing and marketing company, filed for Chapter 11 bankruptcy on Jan. 21, 2008 in the U.S. Bankruptcy Court for the Southern District of New York and filed for protection under the Companies' Creditors Arrangement Act in Canada. Its Chapter 11 case number is 08-10152.

R.R. Donnelley provides print and related services and is based in Chicago.

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