RR Donnelley to Acquire Banta for $1.3 Billion

R.R. Donnelley & Sons Co. has agreed to buy Banta Corp. for about $1.3 billion in cash. The deal, valued at $36.50 a share after a special dividend of $16 a share already declared by Banta, came on the same day Cenveo Inc. pulled its $50 a share offer. R.R. Donnelley’s bid was unanimously approved by the boards of both companies, and is expected to close in the first quarter of 2007. Donnelley reported sales of $8.43 billion in 2005, and Banta has annual revenue of approximately $1.5 billion.

Update on Market Pulp

Market pricing for pulp has remained strong. NBSK (bell weather grade for Pulp) export hikes to Europe appear to have gone through; prices leveled out at $720/mton-$730/mton. Hardwood and Softwood inventories dropped to their
lowest levels since June last month spurring some hardwood producers to announce hikes. New supply may In Chile, Arauco's Nueva Aldea started up last month and CMPC is expected to ramp up its Santa Fee equipment in November. Terrace Bay Pulp started up its 350k/mtpy NBSK line in Ontario and may restart a smaller (125k tpy) line. With
current pulp prices, we suspect that other Canadian mills may be looking at restarts.

Coated Magazine Paper

Coated paper used for magazines and publications remains among the most competitive paper grades.
September prices were adjusted down $10/ton and October prices fell another $10/ton to $825/ton. Demand is down 2.5% YTD and the restart of UPM's Mirimichi mill has boosted supply. Experts are hopeful that capacity closures in Europe - including a just-announced 230K Myllykoski shutdowwn - will begin to help the market. The biggest move to date is the decision by UPM to close 17% of its W. European LWC capacity.

Digital Printing Continues to Increase

First nine months of 2006 illustrated a continued increase of toner based/digital printing growth versus the traditional ink on paper. This trend is forecasted to continue. Toner based/ Digital printing grew 4.5% 1Q06 and 6.1% 2Q06. Of the $170billion USA Printing industry, 70% still constitutes ink on paper and 20% is Toner based / Digital ($34biliion). PIA/GATF estimates 11,680 digital plants are currently in USA - compare to 25,300 sheetfed and 4,200 webfed printing plants.
Printing Impressions, Inc estimates 2006 printing-
Total Shipments $171Billion
Shipment Growth 3%
Ink on Paper growth 2%
Digital Print growth 4%

Top Book Printers

Top North American Book Printers are as follows-
1 -Visant Corp
2- Quebecor
3- Banta
4- Bertelsmann Arvato
5- Courier
6- Transcontinental
7 - Walsworth Publishing
8- Phoenix Color
9- Maple-Vail Book
10- Wbcrafters
11- Edwards Brothers
12- Hess Management
13- Friesens Corp
14- Webcom Ltd
15- Sheridan Group