Chatham Asset Management, LLC (“Chatham“), a private investment firm which manages funds that beneficially own approximately 14.9% of the outstanding common stock of R.R. Donnelley & Sons Company (“RRD” or the “Company”) (NYSE: RRD) and which is the largest bondholder of the Company, today submitted a binding, fully financed offer and draft merger agreement it has executed to acquire all the common stock of RRD not already owned by Chatham for $9.10 per share in cash.
If the termination fee and expense reimbursement payable under the Agreement and Plan of Merger executed on November 3, 2021 (“Atlas Merger Agreement”), between RRD and affiliates of Atlas Holdings LLC (“Atlas”) is eliminated, Chatham will increase its offer to $9.34 per share. Chatham’s offer is worth approximately $47.9 million to $67.9 million more than Atlas’ offer to acquire RRD for $8.52 per share, depending on the elimination of the termination fee, and is not conditioned on any further diligence.
Chatham has received a debt commitment letter led by Jefferies Finance LLC in an aggregate amount of up to $1.675 billion. Chatham is committing, immediately prior to the closing of the transaction, $100 million of additional capital, rolling over all shares of common stock of RRD beneficially owned by Chatham, valued at approximately $99.4 million based on the proposed purchase price of $9.10 per share, and equitizing and/or subordinating into PIK instruments up to $748.4 million of the aggregate principal amount of RRD’s outstanding notes which Chatham currently owns – which represents approximately 53.9% of RRD’s outstanding notes. Since October 12, 2021, Chatham has increased its debt ownership position by $172.8 million.
Chatham said, “While we are deeply troubled by the Board of Directors’ failure to conduct a reasonable sale process, especially before agreeing to a breakup fee and expense reimbursement equal to as much as $28 million with Atlas, we remain excited by the prospect to acquire RRD and steward the Company in its next phase. Our offer is superior, by any measure, to Atlas’ offer, and delivers to stockholders value that is rightfully theirs.”
Additionally, Chatham today filed a lawsuit in the Delaware Court of Chancery (the “Court”) against the Board of Directors (the “Board”) and Atlas to ensure a level playing field and reasonable and fair sale process aimed at maximizing stockholder value. Specifically, Chatham is requesting that the Court declare the Atlas termination fee and certain other provisions of the Atlas Merger Agreement unenforceable, cause the Company to redeem the poison pill and waive certain provisions of Delaware law that could prevent Chatham from taking its offer directly to stockholders through a third party tender offer.
“Over the past two years, despite RRD’s plummeting share price, the Board has repeatedly gone to great lengths to entrench itself and avoid constructive engagement with Chatham, including by unilaterally enacting a poison pill without stockholder approval that seemed expressly targeted at Chatham and ignoring our value enhancing proposals. The Company’s refusal to negotiate with us before entering into an inferior transaction only serves to reinforce that RRD’s Board has no regard for the basic tenets of corporate governance or the interests of its stockholders. We are left with no choice but to commence litigation to protect our longstanding investment and our fundamental rights as a stockholder,” said Chatham.
The full text of Chatham’s letter to the Board follows:
November 16, 2021
The Board of Directors
R.R. Donnelley & Sons Company
35 West Wacker Drive
Chicago, Illinois 60601