The Quarto Group announced this morning that it has received a takeover offer from an unidentified party that the company’s board believes to be “attractive and reflective of the inherent value of the business” and “worthy of due consideration.”
The publisher’s announcement further said that discussions with the bidder “are at an early stage” and that there is no guarantee that an offer will be made or on what terms.
Quarto chief executive Marcus Leaver told PW that the bid was unsolicited and, while there is no timetable for a decision to be made on the offer, he does not want the process to drag out. He said an update on the status of the discussions could come in the next few weeks. Among the considerations being taking into account is that any sale would be in the best interest of Quarto shareholders and that “the potential acquirer would be a good home for each and every one of our employees.”
News of the acquisition talks accompanied the release of Quarto’s six month’s earnings report, which showed revenue of $50.2 million, down 13% compared to the first half of 2016. The company’s operating loss rose to $7.6 million from $400,000 in last year’s first six months. In July, Quarto issued a trading update that its financial predictions for 2017 given earlier in the year were too high.
In discussing the first half results, Leaver reiterated that 2017 is a transitional one for the company, following the sale of its non-core assets. Those sales of Books & Gifts Direct (BGD) Australia and Regent Publishing Services positioned the company as a pure publisher, and as such put more importance on the second half of the year, Leaver said. The two companies sold tended to have a strong first half, Leaver explained, acknowledging that Quarto “had a tricky six months.”
Among the operational highlights Quarto pointed to in the first half of 2017 were continued softness in the retail environment in both the U.S. and U.K., characterized by a changing product mix and unusually high returns from key customers. In the U.S., despite a revenue contribution from becker&mayer which Quarto bought last August, total revenue was affected by the significant sales of coloring books in the first half of 2016, which were not replaced by another trend in the first half of 2017; sales in the U.S. fell 14%, to $26.9 million. Adult publishing imprints and international English language co-edition sales were hit especially hard by market softness. The children’s publishing imprints and foreign language sales performed better.
Despite the difficult first half of 2017, Leaver said he remains confident that Quarto will have a stronger close to the year.
With over 400 people in the U.S., the U.K., and Hong Kong, Quarto sells books in 47 countries and in 39 languages.