CHICAGO, TORONTO, Canada, and NEW YORK - R.R. Donnelley & Sons. Co. and Moore Wallace Inc. Sunday announced that they have signed a definitive agreement to create the world's premier full-service commercial printer with more than $8 billion in annual revenues, a leading position in North America and approximately 50,000 employees worldwide. The combined company will provide customers with the industry's broadest array of high-quality, long- and short-run print products and solutions, from magazines, telephone directories, books, catalogs, inserts and financial documents, to billing statements, outsourced customer communications, highly personalized direct mail, premedia, print fulfillment, labels, collateral materials, forms and logistics services. The boards of directors of both companies have unanimously approved the agreement.

The combined company will retain the Donnelley name and will be headquartered in Chicago. Upon closing of the transaction, Mark A. Angelson, chief executive officer of Moore Wallace, will become CEO of the new Donnelley, succeeding William L. Davis, chairman, president and CEO of Donnelley. In July, Davis announced his intention to retire when a successor was identified. Longtime Donnelley director Stephen M. Wolf is to become non-executive chairman of the board of the combined company.

Under the terms of the transaction, Moore Wallace shareholders will receive R.R. Donnelley & Sons Co. shares based on a fixed exchange ratio of 0.63 of a Donnelley share for each Moore Wallace share. This represents $17.66 in value per Moore Wallace share, or approximately $2.8 billion in total equity value, a premium of 16 percent, based on the closing stock prices of both companies on the New York Stock Exchange Nov. 7. Donnelley will assume approximately $900 million in Moore Wallace debt.

The combined company will be traded on the NYSE under the ticker symbol DNY. Upon completion of the transaction, Donnelley and Moore Wallace shareholders will own, respectively, approximately 53 percent and 47 percent of the combined company. Donnelley is expected to maintain an investment grade credit rating and to maintain its annual dividend of $1.04 per share. Donnelley and Moore Wallace will contribute eight and seven directors, respectively, to the combined board.

The transaction is expected to be accretive to Donnelley's earnings in the first full year of operations, excluding the impact of transaction-related charges. In addition to significantly enhanced revenue opportunities, the combined company expects to generate cost savings of at least $100 million on an annualized basis in the first 12-24 months after the closing. These savings are anticipated to result from the elimination of duplicative administrative and infrastructure costs, reduction in procurement expenses and asset rationalization. The combined company also is expected to generate substantial cash flow in the first year of consolidated operations.

Davis, said, "Today's announcement is a tremendously positive step forward in the continued evolution and development of R.R. Donnelley. The transaction will place the new R.R. Donnelley among the Fortune 250. It is great news for our customers, our employees and our shareholders. I am especially pleased that Mark Angelson will be leading this company, and look forward to a smooth transition."

Angelson said, "This transaction is strategically and financially compelling, bringing together the industry's most established and highly regarded companies and the industry's most advanced technologies to create a dynamic new business platform. The combination will enable the new R.R. Donnelley to offer the world's leading companies a comprehensive suite of print and related products and solutions that will meet the demands of our growing customer base. Through this combination, the new R.R. Donnelley will serve leading global, national, regional and local customers and will provide every printing need a company of any size could require."

The transaction is subject to approval by R.R. Donnelley stockholders and Moore Wallace shareholders, and Ontario court approval of a plan of arrangement, which will provide for the compulsory exchange of each outstanding share of Moore Wallace for 0.63 of an R.R. Donnelley share. In addition, the transaction is subject to anti-trust clearance and Investment Canada approval, and is expected to close in the first quarter of 2004. The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. It is expected to be taxable to Canadian shareholders of Moore Wallace. [[In-content Ad]]