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Data Communications Co. Closes on Acquisition

Source: Streetwise Reports


April 27, 2023 ( Newswire) Printing and marketing services company Data Communications Management Corp. is announcing the closing of its acquisition of R.R. Donnelley & Son's Canadian operations.

Printing and marketing services company DATA Communications Management Corp. (DCM:TSX; DCMDF:OTCQX) announced the closing of its acquisition of R.R. Donnelley & Son's Canadian operations.

Company President Richard Kellam called the transaction, which is expected to more than double the company's revenue, a "significant milestone" for the company.

"As one company, we are now focused on driving growth and value creation by delivering consistent and seamless service to our customers and positioning DCM for sustainable and long-term success," Kellam said.

DCM is acquiring RRD's Canadian operations for CA$130.8 million. RRD Canada provides print and related services to thousands of customers across the country, had a revenue of about CA$250 million in 2022, and has 1,000 employees.

The companies are "a perfect fit," Kellam has said. The transaction "combines two companies with complementary operating models and best-in-class products, (and) very strong customer relationships . . . There (are) many meaningful benefits for our clients and for our customers, being bigger and better together and obviously, attractive financial benefits, and value creation opportunities for DCM."

The Catalyst: Complementary Operating Models

Analyst Chris Thompson of eResearch, in a March research note, said the companies have complementary operating models.

"The consolidated firm is poised to offer enhanced value and innovation to its customers, while DCM anticipates that this deal will establish a long-term, sustainable enterprise that caters to Canadian and U.S. customers," Thompson wrote, maintaining a Buy rating on the stock with a one-year price target of CA$4.50 per share.

After the news broke in March that DCM's revenue had risen 20% YoY from 2021 to 2022, DCM's stock went from CA$2 to CA$2.15. Analyst Clive Maund of predicted a powerful upleg for the stock and rated it a Strong Speculative Buy.

The stock has continued to rise since then and was CA$3.17 on Tuesday.

"We believe this transaction enhances DCM's capabilities and growth potential," Thompson wrote. "RRD Canada has a highly complementary operating model and is expected to add new products, services, and technology capabilities."

The new company would have about CA$520 million in annual sales from day one, an expanded customer base serving more than 400 enterprise clients, and an enhanced product portfolio, DCM said.

The company's new five-year strategic financial objectives are to grow annual revenues organically at a compounded annual growth rate (CAGR) of more than 5% per year, achieve adjusted EBITDA as a percentage of revenues of more than 14%, and reduce total net debt as a multiple of Adjusted EBITDA to less than 1.0x.

'Plenty of Upside Revenue Potential'

DCM the purchase price was CA$130.8 million cash through revolving credit and floating rate bridge facilities from a Canadian-chartered bank and a new CA$50 million fixed-rate credit facility from Fiera Private Debt.

Included in the purchase are three sites owned by RRD with an implied net value of about CA$30 million. DCM said it had entered a sale and lease-back arrangement for one of the sites and expects to realize net proceeds of about CA$23 million that will be used to substantially repay the bank bridge facility.

DCM helps companies with branding, communications, and logistics and provides customer loyalty programs, data, and content management, location-specific marketing, labels and asset tracking, multimedia campaign management, and workflow management.

Its clients are in many industries, including financial services, health care, emerging markets, retail, non-profits, energy, hospitality, and transportation.

The tech-enabled marketing and digital asset management (DAM) sectors are forecasted to grow annually by 15% and 21%, respectively, Thompson said. DAM services generated only 1.3% of the company's revenue in 2020. [OWNERSHIP_CHART-10607]

But "with the proliferation of video and digital content, the total DAM addressable market is forecasted to reach US$6 billion by 2025; thus, there is plenty of upside revenue potential," Thompson wrote.

Ownership and Share Structure

Management and insiders own about 45% of DCM, including a share program that gives employees close to 4% ownership.

Top insider shareholders include Director Michael Sifton with 10.2% or 4.5 million shares, Board Vice Chairman Greg Cochrane with 7.43% or 3.28 million shares, Chairman of the Board J.R. Kingsley Ward with 5.54% or 2.44 million shares, and the CEO Kellam with 1.67% or 0.74 million shares, according to Reuters.

According to the company, the rest, 55%, is retail. Reuters lists KST Industries Inc. as the top shareholder in the company overall, with 11.69% or 5.15 million shares.

The company is covered by Noel Atkinson of Clarus Securities and Chris Thompson of eResearch. Newsletter writer Clive Maund also covers the stock.

It has a market cap of CA$144.53 million with 44 million shares outstanding, with 27.3 million shares free-floating. It trades in the 52-week range of CA$3.39 and CA$1.01.


1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Data Communications Management Corp. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

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eResearch Disclosures:

eResearch was established in 2000 as Canada's first equity issuer-sponsored research organization. As a primary source for professional investment research, our Subscribers benefit by having written research on a variety of under-covered companies. We also provide unsponsored research reports on middle and larger-cap companies, using a combination of fundamental and technical analysis. We complement our corporate research coverage with a diversified selection of informative research publications from a wide variety of investment professionals. We provide our professional investment research and analysis directly to our extensive subscriber network of discerning investors, and electronically through our website:

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eResearch Intellectual Property: No representations, express or implied, are made by eResearch as to the accuracy, completeness, or correctness of the comments made in this report. This report is not an offer to sell or a solicitation to buy any security of the Company. Neither eResearch nor any person employed by eResearch accepts any liability whatsoever for any direct or indirect loss resulting from any use of this report or the information it contains. This report may not be reproduced, distributed, or published without the express permission of eResearch.


eResearch Analyst on this Report: Chris Thompson CFA, MBA, P.Eng.

Analyst Affirmation: I, Chris Thompson, hereby state that, at the time of issuance of this research report, I do not own common shares, share options, or share warrants of DATA Communications Management Corp. (TSX:DCM).


eResearch is engaged solely in the provision of equity research to the investment community. eResearch provides published research and analysis to its Subscribers on its website (, and to the general investing public through its extensive electronic distribution network and newswire agencies. eResearch makes all reasonable efforts to distribute research material simultaneously to all of its Subscribers.

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DATA Communications Management Corp. paid eResearch a fee to have it conduct research and publish reports on the Company for one year.

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