memphis — Master Graphics Inc., the Memphis firm that purchased two Jackson-based printing operations within the last year as part of a major acquisition strategy, has filed papers with the Security and Exchange Commission to have a public stock offering.
Although a sale date was not included in the preliminary prospectus filed April 13, language in the document and previous communications with Master Graphics indicate that the sale could occur sometime this month.
The company plans to offer approximately 3.6 million shares of common stock at a price of $11 to $13 per share, according to the prospectus. Morgan Keegan & Co. in Memphis is the underwriter of the sale. After expenses, proceeds from the sale are expected to be around $37 million, or as high as $43.1 million if Morgan Keegan utilizes the additional shares allowed by an over-allotment option. The company plans to trade the shares on the Nasdaq Stock Market under the ticker symbol MAGR.
Existing shareholders of the company, including officers and directors, will own about 53% of Master Graphics, and the company will have approximately 8.03 million shares outstanding. Of the two Jackson firms purchased by Master Graphics — Blackwell Lithographers and Hederman Brothers Printing — only H. Henry Hederman, a son of one of Hederman’s founders, was listed on the prospectus as a director of Master Graphics.
According to the prospectus, the revenue from the stock sale will go towards meeting the company’s mounting debt obligations. At Dec. 31, 1997, on a pro forma basis, the company’s indebtedness was approximately $77 million. Currently, the company has $85 million of secured credit with its senior lender and has received a commitment from such lender to increase to $90 million upon closing of the offering.
In addition to helping relieve some of its debt, the company said it plans to finance future acquisitions, in part, by using shares of its common stock as consideration and use the stock for employee incentive programs.
As of Dec. 31, 1997, Master Graphics had revenues of $154 million with operating income of $8.5 million. The company employs around 1,100.
Formerly B & M Printing, Master Graphics Inc. and subsidiary Premier Graphics, were formed in June 1997 to begin the purchase and operation of small- to medium-sized printing concerns. Since that time, the company has acquired nine printing companies with operations in Jackson, Memphis, Atlanta, Chicago, Chattanooga, Montezuma, Iowa; Ozark, Mo., Springdale, Ark., and Henderson, N.C. The company currently has an agreement to purchase Nashville-based McQuiddy Printing Co.
The key elements of the company’s acquisition strategy have been to target “high quality, well managed companies” and then “retain existing management of [the] companies acquired,” according to the prospectus.
The company plans to continue acquiring independent commercial printing companies across the United States in order to fulfill its mission of becoming the “leading provider of general commercial printing services in the United States,” the prospectus said.
The prospectus noted that the general commercial printing industry, which had approximately $43 billion in sales in 1996, according to the Printing Industries of America, is characterized by unpredictable shifts in demand and fast turnaround times. In order to remain competitive and meet their customers’ demands, general commercial printers must make substantial investments in plant capacity.
Overall, the printing industry is one of the largest and most fragmented industries in the United States with total estimated 1996 sales of $132 billion spread among an estimated 50,000 printing companies, according to the PIA. There are approximately 25,000 general commercial printing companies in the United States.
Master Graphics provides a wide array of general commercial printing services and prints annual reports, direct mail pieces, sales literature, point of purchase materials, newsletters, training manuals, product brochures, catalogs and more. Customers include Federal Express, IBM, Provident Life, W. W. Grainger, Turner Broadcasting and G. D. Searle.
Calls to Blackwell, Hederman and Master Graphics seeking comment were not returned.