A month after pledging to “vigorously defend” its proposed $1.4 billion acquisition of rival publication printer LSC Communications in the face of a Justice Department lawsuit challenging the deal, Quad/Graphics announced on Tuesday that the two companies have agreed to end the fight.
The proposed merger—which was approved by both companies’ shareholders in February—faced opposition from groups like the Authors Guild and free speech advocate PEN America, who argued that combining “the two sole competitors in the long-run magazine and book printing markets” would create a dangerous monopoly that could further beleaguer print magazine and book publishers.
In separate statements, both Quad/Graphics and LSC reaffirmed their disagreement with the Justice Department’s assessment of the deal, but reasoned that the benefits of the merger would be outweighed by the delays and legal costs associated with fighting the DOJ lawsuit.
As the blog Dead Tree Edition noted, a federal judge denied a request from the two printers for an expedited trial last week, meaning that even if it were ultimately approved, the proposed merger likely wouldn’t come into effect until sometime next year.
“Quad and LSC’s printing and distribution resources vastly exceed those of other competitors and the two serve as the only realistic options for many publishers and retailers,” read the DOJ complaint filed June 20. “Quad and LSC compete head-to-head on price and quality to win customers’ business. By eliminating the ‘intense rivalry’ between these two firms, the proposed merger would deny their customers the benefits of competition and likely increase the price and reduce the availability of products from popular magazines to grade school textbooks.”
The magazine publishers themselves refrained from stating any opposition to the deal publicly; Meredith Corp.—which was sued by Quad/Graphics last year in a dispute over contracts it inherited from Time Inc., a case which was later dismissed—and the MPA both declined to comment on Tuesday’s development, while reps for Condé Nast and Hearst did not respond.
“We are disappointed by the Justice Department’s decision to sue to block the transaction and believe that the lawsuit does not reflect the dynamics of print today and the competitive effect of digital media,” said Quad/Graphics chairman, president and CEO, Joel Quadracci, in a statement. “However, rather than devote time and resources to prolonged litigation, we are choosing to focus on ensuring that our clients benefit from our Quad 3.0 growth strategy through exciting innovations in printing and integrated multichannel marketing solutions that reduce complexity, increase efficiencies and enhance marketing spend effectiveness.”
Quad/Graphics will pay LSC a $45 million fee as a result of the deal’s termination.
Shares of LSC had dropped 35.6% to $2.24 as of 12:00 pm EDT Tuesday, while Quad/Graphics was up 11.2% to $8.45.