R.R. Donnelley & Sons Co ( RRD )
has acquired privately-held outbound mailing services provider
Express Postal Options International. The financial terms of the
deal were not announced.
The acquisition of Express Postal Options International or XPO
will not only strengthen Donnelley's logistics business segment but
also expand its operations in more than 150 countries.
The California-based XPO has a strong global logistics network.
XPO's customers include companies from various sectors such as
pharmaceutical, e-commerce, financial services and information
technology to name a few. Leveraging XPO's strong logistics network
Donnelley will now be able to provide better and more efficient
service to its customers.
Donnelley has been experiencing strong growth in the logistics
segment. In the last concluded quarter, this segment reported an
11.3% jump in revenue. Strong growth in the logistics space along
with volume increase in certain office products restricted the
decline in revenues to 3.6% on a year-over-year basis.
The company's logistics division has made it possible for its
customers to deliver finished goods in a cost effective way.
Moreover, the company has taken significant initiatives to expand
its third-party logistics business, which will further gain from
the XPO acquisition.
Donnelley is focusing on acquisitions to expand and enhance its
offering to its current customers, as well as to expand the
customer base. The company's continued focus on acquisitions will
also spur its already dominant market position and drive long-term
However, we expect Donnelley to remain under pressure due to
weak macroeconomic conditions prevailing in most of its current as
well as prospective markets. Higher pension expenses, continuing
pricing pressure, volatility in raw material prices and a highly
leveraged balance sheet are other headwinds going forward.
Additionally, publishers are increasingly coming out with
digital versions of books and sophisticated e-book readers from
Amazon.com Inc. ( AMZN )
and Barnes & Noble Inc. ( BKS )
are becoming increasingly available. Thus, the interest in
commercially printed paperbacks and hard covers is waning.
We remain Neutral over the long term. Currently, Donnelley has a
Zacks #2 Rank, which implies a Buy rating in the short term.
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