Quebecor Inc. Business Information, Profile, and History

Company Perspectives:

Quebecor, a communications leader since 1950, offers clients a complete range of communications products and services, from commercial printing--where we rank first in the world--to cable TV and Internet access, not to mention newspaper, magazine and book publishing, television broadcasting, Internet portals, Web integration, and distribution and retailing of cultural products such as CDs, videos, DVDs and books. Quebecor's two major subsidiaries--commercial printer Quebecor World Inc. and media giant Quebecor Media Inc.--deliver a full spectrum of services to help clients maximize their visibility and commercial impact and build their brands. Quebecor: on top of the media world!

History of Quebecor Inc.

Quebecor Inc. is a vertically integrated company with two main related businesses: commercial printing, and media. Quebecor World, its printing division, is the world's largest commercial printer, with over 150 printing plants on five continents. The company's media arm oversees Sun Media, one of the largest newspaper publishers in Canada; runs Vidéotron, Quebec's largest cable television service; operates a commercial television network in Quebec, TVA; and owns dozens of Canadian book publishers, several internet companies, and a chain of music stores and video rental clubs.

Getting a Start in the 1950s with Papers and Presses

Pierre Péladeau, Quebecor's founder, president, and chief executive officer, bought his first newspaper in 1950 when he was 25 years old. His father had been successful in business, but lost his fortune by the time of his death when his son was only ten. His mother managed to send Péladeau to an exclusive school and he continued his education at elite universities. At an early age, Péladeau decided he would control his own financial destiny. "I always created my own jobs," Péladeau told Forbes. A graduate of McGill University with a degree in law and of the University of Montreal with a master's degree in philosophy, Péladeau borrowed C$1,500 from his mother to buy the ailing weekly Le Journal de Rosemont, and worked hard to make the paper a success. In 1953 Péladeau bought his first printing press. More dailies and printing presses followed, until Péladeau had built the beginnings of his empire.

A 1964 strike at Quebec's leading French language daily, La Presse, gave Péladeau a big opportunity. In La Presse's absence, Péladeau launched his own daily, Le Journal de Montréal. The tabloid, which featured graphic pictures of crime scenes, heavy sports coverage, pin-up girl photos, and no editorials, met with immediate success. La Presse's return to the stands seven months later slowed but did not halt that success. In fact, circulation rose during the following years until Le Journal became Quebec and North America's leading French language daily in the late 1970s, a status it maintained into the 1990s.

After an entrepreneurial beginning and incorporation in 1965, Quebecor Inc. pursued a decade long course of acquisition and expansion that aimed to consolidate the company's leading position in the fields of publishing and printing in Canada and the United States. In the ten years after 1965, over 100 subsidiaries were added to the Quebecor empire. The location and business activity of Quebecor's subsidiary purchases indicated the success of the company's stated strategic objective: "[To] Broaden its reach across North America and overseas; to acquire additional product market share and diversity; to target and acquire underperforming assets that are geographically well situated and improve their performance; and to achieve a size that maximizes the benefits of economies of scale."

In 1967, Péladeau founded Le Journal de Quebec, and later added an entertainment magazine and the Winnipeg Sun to his newspaper holdings. Labor lawyer Brian Mulroney, eventually to become Canada's prime minister, worked out Le Journal's first labor agreement. Péladeau's generous dealings with labor cemented his positive reputation with the public. In 1972, Péladeau offered shares in Quebecor on the Toronto Stock Exchange.

International Reach in the 1970s and 1980s

In 1977, Péladeau gambled in the U.S. newspaper market by launching the Philadelphia Journal. But this venture turned out to be one of Péladeau's few misjudgments of the market and the competition. He thought the extensive sports coverage and tabloid format used in Le Journal would be a big hit in Philadelphia. Yet the paper's competition simply increased its sports coverage and cut advertising rates to squeeze Péladeau out of the market. Five years later, at a loss of US$14 million, the paper closed its doors.

In the next several years, Péladeau undertook a more aggressive campaign to establish a presence in the U.S. market and to take the number one position in Canada. He saw that technology and economies of scale were becoming increasingly important to success in the printing and publishing industries due to changes in technology and a more competitive world economy. His strong customer orientation and grasp of client needs, both in business-to-business and consumer markets, were great assets in the strategic expansion of Quebecor. Quebecor invested in emerging technologies, allowing retailers and advertisers to regionalize product offerings and prices. Bar code technology allowed the creation of large databases from which computers could determine demographic buying patterns, making it possible to tailor publications to specific regions, neighborhoods, or even individuals. These technologies required specialized capabilities, including binding techniques that allowed customized compilation of pages destined for different markets.

Péladeau and British publishing magnate Robert Maxwell teamed up in 1987 to form Mircor Inc., a joint subsidiary created to purchase--for C$320 million--a 54 percent stake in Donohue Inc., a leading forest products company in Quebec. Quebecor took a 51 percent share of the newly formed Mircor. The Donohue acquisition gave Quebecor its status as one of the most vertically integrated communications companies in the world, for it allowed the company to do everything from cutting the tree to distributing the printed product. Donohue supplied paper for Quebecor's journals and magazines and for direct mail advertising for its retail clients.

In 1988, Quebecor bought almost all of the printing assets of BCE Inc., the owner of Bell Canada, for C$161 million and a 21 percent share of Quebecor capital stock. The acquisition expanded Quebecor's printing capabilities and brought in lucrative contracts for printing telephone directories, currency, and passports. This acquisition made Quebecor first in printing in Canada and gave the company significant economies of scale, positioning it well for success in the increasingly competitive and technology driven industry.

More Acquisitions in the Early 1990s

In 1990, Quebecor bought Maxwell Communication Corporation's 14 U.S. printing operations, forming the basis of Quebecor Printing. The US$510 million deal included a non-competition agreement and the purchase by Maxwell of a 25.8 percent interest in Quebecor Printing for US$100 million. According to Michael Crawford in Canadian Business, the purchase gave Quebecor access to a C$744 million customer list and rotogravure presses tailored to U.S. advertisers and catalogue companies. Only a year later, Robert Maxwell's death revealed his holdings to be in a financial mess. Quebecor bought back its shares from Maxwell for US$94.8 million, US$5.2 million less than Maxwell had paid for it, giving Quebecor 100 percent ownership of Quebecor Printing.

Quebecor was not immune from the recession in the early 1990s. Plummeting newsprint prices in 1991 created heavy losses at Donohue, substantially eating into Quebecor's revenues. Advertising was down as well, putting pressure on the publishing and printing segments. In anticipation of the North American Free Trade Agreement (NAFTA), Quebecor established a foothold in Mexico by buying Mexican printer Graficas Monte Alban S.A. The move was another step forward in Quebecor's determination to become a truly North American company and gave Quebecor a presence in all three North American countries. Graficas printed books for Mexican and South American publishers. With about 200 employees and annual sales of US$4.5 million, Graficas was not a large acquisition. Nevertheless, it provided a starting point from which to learn the Mexican market and expand holdings in the fast growing nation of 80 million people.

Quebecor expanded further in 1992 as it made large investments in its printing facilities and took Quebecor Printing Inc. public with an initial public offering that left the parent company with a 67.57 percent share of its printing subsidiary. Proceeds from the offering were used to reduce bank debt. In the same year, Quebecor won two lucrative five-year contracts to print and bind Canadian telephone directories. The value of the contracts over five years was estimated at a combined total of C$505 million.

In 1992 and 1993, Quebecor Printing acquired Arcata Graphics, San Jose, and three major Arcata Corporation printing plants, bringing in clients such as Reader's Digest, Parade, and TV Guide. The acquisition of these plants substantially expanded Quebecor's market share and capacity in producing catalogues, magazines, and books. Advanced web offset publication, special binding, ink jet printing, and shorter run production capabilities were some of the technologies enhanced by the purchase. In 1994, Quebecor completed its buyout of Arcata when it exercised its option to buy the company's outstanding shares. The final acquisition added five book manufacturing plants and a distribution facility to Quebecor, making the company the second largest book fabricator in the United States.

The strategic importance of Quebecor's expansion of its printing operations and move into the U.S. market was apparent from financial figures. By the end of 1993, U.S. sales represented more than 73 percent of Quebecor Printing's revenues and 64 percent of Quebecor Inc.'s revenues.

Quebecor's launch of Le Magazine Provigo with Provigo supermarkets in early 1993 was another example of Quebecor management's insight into consumer trends and changing markets. Four years before the magazine was introduced, Quebecor had approached the supermarket chain with the idea of differentiating itself from competitors by producing a monthly magazine on nutrition and health, with bits about local sports and entertainment celebrities. Quebecor hoped the magazine would join its information and distribution networks with Provigo's large target market to produce an effective advertising vehicle. Though Provigo was not ready to make the investment at the time, increased competition and narrowing profit margins in the retail grocery business eventually compelled Provigo to embrace the more upscale image offered by the magazine.

Quebecor Printing continued its international expansion with purchases and contracts in France, India, and Lebanon. Quebecor chose France because it was strategically situated to serve the European market, the world's second largest market for printed products after the United States. In 1993, Quebecor acquired 70 percent of the shares of commercial printer Groupe Fécomme for about US$12 million. The concern was renamed Imprimeries Fécomme-Quebecor S.A. The operation included three printing plants that made magazine covers, advertising inserts and circulars, and direct mail. Quebecor signed a letter of intent a few months after the Fécomme purchase to buy 49 percent of the shares of Groupe Jean Didier, the largest printer in France, for US$27.6 million. The deal was completed in early 1995. The company produced magazines, catalogues, and inserts. With the two acquisitions, Quebecor established a significant foothold in Europe.

A partnership was formed in 1993 with Tej Bandhu Group in India to construct a printing plant, called Tej Quebecor Printing Ltd., for printing the majority of telephone directories in India. With a population of 850 million, the establishment of a subsidiary in India provided great potential for future expansion. In 1994, Quebecor was awarded a contract to produce bank notes for the central bank of Lebanon. The job specified at least 29 million large denomination pound notes. The new issue represented the first time Lebanon had printed its currency outside of England since its independence in 1943.

On the domestic front, 1994 saw the loss of one of Quebecor's major contracts, the printing of the U.S. edition of Reader's Digest, the largest paid monthly circulation magazine in the United States. Quebecor lost the US$20 million-a-year, ten-year contract to its major U.S.-based competitor, R.R. Donnelley & Sons Co. Donnelley was the largest commercial printer in North America and the world, with three times the revenues of Quebecor Printing. The contract was apparently awarded to Donnelley because of the company's technological capabilities in targeting advertising to specific subscriber groups. Another factor in the loss of the contract may have been the refusal of some unionized workers at Quebecor Printing of Buffalo Inc., where the magazine was printed, to accept a ten-year no-strike/no-lockout amendment to the contract. Quebecor planned to make up the lost volume with growth in book printing.

Continued Growth After Founder's Death: Late 1990s

Pierre Péladeau was 71 in 1996, and beginning to talk about leaving his company to his sons. Though Péladeau himself was evidently not in the best of health, Quebecor was still active, making acquisitions and entering new markets. Quebecor Printing's revenue was over $3 billion by the mid-1990s. Quebecor's pulp and paper subsidiary, Donohue, made a $1.1 billion acquisition in 1995, and was on the lookout for another major opportunity. Péladeau's second son, Pierre-Karl, left Quebecor's communications division in 1995 to head Quebecor Printing Europe. Within a few years, this subsidiary had made enough acquisitions to rank it as one of the largest printing companies in Europe. In late 1996, Quebecor made a bid for the Toronto Sun Publishing Company, which sold Sun papers in Toronto, Edmonton, Calgary, and Ottawa. Toronto Sun had a slim profit margin, and Péladeau was sure his company's management could convert the newspaper chain into much more of a money-maker. However, Péladeau himself was a controversial figure, and several of the newspaper's columnists voiced outrage at the prospect of his owning the company. Péladeau had made an anti-Semitic comment in a magazine profile in the early 1990s which he had not retracted; he was viewed as favoring Quebec separatism; and he made no bones of his past as an alcoholic and as a manic-depressive. Eventually the Toronto Sun was sold to its own management team, and took the name Sun Media.

Pierre Péladeau died of a stroke in December 1997. He was succeeded by Pierre-Karl Péladeau. Within a year, Quebecor renewed its offer for Sun Media, which this time was accepted promptly. Quebecor paid C$983 million (US$680 million) for Sun and the combined media company became the second largest newspaper group in Canada. Quebecor filled the late 1990s with other significant acquisitions as well. The company moved into book publishing beginning in 1997, and within a few years Quebecor had bought up five major Quebec publishers. The company also moved into television, buying the French-language network TQS. In 1999 the company launched a New Media division, capitalizing on the boom in Internet communications. Quebecor invested in various fledgling electronic commerce projects, and created a new company, Nurun, which was the largest so-called Web integrator in Canada, and a leader in the European market as well.

The largest acquisition of all was Quebecor's deal in 1999 to merge with its rival commercial printer World Color Press. World Color was quite similar in its operations to Quebecor Printing, producing magazines, catalogs, books, direct mail circulars, and other printed goods at plants principally in the United States. The new combined company had roughly 175 printing facilities on five continents, and vaulted to the number one spot in the worldwide commercial printing industry. Quebecor's printing division changed its name to Quebecor World after the merger.

Quebecor's partially owned paper subsidiary, Donohue, also made a major acquisition, buying Texas-based newsprint and specialty paper maker Champion International in 1998. Then in early 2000, Quebecor announced it was selling its stake in Donohue to a third company, Abitibi-Consolidated. Quebecor then took an 11 percent share in Abitibi. Quebecor's management became embattled with Abitibi over the next year, when it insisted that Abitibi's CEO step down. Quebecor eventually dropped its demand, and then sold off its stake in the company. The move allowed Quebecor to pay off debt it took on when making another major purchase, the Quebec cable television station Groupe Vidéotron. Quebecor began the new millennium seemingly having accomplished the goals it set out decades ago. It was a truly global company, a powerhouse in media of all sorts, with paper and printing facilities around the world.

Principal Subsidiaries: Quebecor World Inc.; Quebecor Media Inc.; Sun Media; Groupe Vidéotron Itée; Nurun Inc.; TVA Group Inc.

Principal Competitors: Southam Inc.; R.R. Donnelley & Sons Co.; Dai Nippon Printing Co., Ltd.

Chronology

• Key Dates:
• 1950: Pierre Péladeau buys his first newspaper, Le Journal de Rosemont.
• 1964: Péladeau launches Le Journal de Montréal.
• 1965: Company incorporates as Quebecor Inc.
• 1972: Quebecor goes public.
• 1987: Company takes stake in paper firm Donohue.
• 1990: Printing business is launched with acquisition of Maxwell Communication Corp.'s U.S. printing operations.
• 1997: Pierre Péladeau dies.
• 1999: Quebecor acquires Sun Media; printing division merges with World Color Press.