Summary
This article is merely an announcement. It doesn't address the importance or the upcoming advantages of a management buyout vs. a $3billion share repurchase which is the other option under consideration.
Even though S&P lowered its Outlook rating to negative it maintains its A- score. Despite the recent press it is clear sitting here in Chicago that RR Donnelley will increase its already heavy debt load with a management buyout.
Stockholders should be pleased with the possibility of upcoming stock price appreciation from this potential leveraged buy out.
Longer term investors then are banking on management having more skin in the game of leading the largest printing company here in the US.
Analysis
S&P also pointed out that Donnelley is being challenged or as I would put it held hostage by its third-biggest shareholder, Atlantic Investment Management Inc.
On Thursday of last week, the New York-based hedge fund called on Donnelley to undertake a $3 billion share-repurchase plan instead of considering a buyout. Donnelley's market capitalization, calculated by multiplying its share price by the number of shares outstanding, is about $7 billion.
Here the Investor is urging the Board to maximize its shareholder value by the repurchase.
In the weeks ahead though price will be a substantial challenge as financing cost are sure to bolster an already heavy debt load.
