Proposed Acquisition Roils Reprographics Sector
By JENNIFER BELLANTONIO
There’s a big stink brewing in a segment of Orange County’s graphics industry.
The pending sale of Irvine-based Consolidated Reprographics to the owner of cross-town rival OCB Reprographics has created an industry brouhaha and caught the eye of federal regulators.
OCB parent American Reprographics Co. of Glendale is looking to buy Consolidated from Troy, Mich.-based Lason Inc., which filed for bankruptcy reorganization.
The Federal Trade Commission’s San Francisco office has been looking into the proposed buy. An office spokesman declined to comment for this story.
Several small reprographic businesses said they’ve been contacted by a regulator either in person or by phone. Those contacted for this story said they fear that if the deal goes through, they won’t be able to compete.
American stands to own the top two reprographic businesses in OC as a result of the proposed buy. OCB and Consolidated count 350 to 400 workers each and yearly sales in the $40 million range.
David Stickney, marketing director at American, said the company has responded to all of the FTC’s requests. So far, the proposed buy is on track, he said.
When American acquires a business,it has 50 independently operated divisions nationwide,”We continue to run that business from the customer counter forward as an independent business,” Stickney said.
If the sale goes through, Stickney said, Consolidated and OCB most likely would be run separately under their respective names.
“The reason we do this is to foster competition in the marketplace,” he said. “That’s important to us because we certainly have markets where we have more than one American Reprographics division competing against each other.”
Smaller players contend American stands to control 80% to 90% of the local market if it buys Consolidated.
The proposed buy has smaller competitors, which average about $1 million or less in annual revenue, worried they could “get muscled out of the market.”
“In the face of big money, there’s nothing you can do,” said Zachary Dafaallah, president of Irvine-based Pacific Coast Reprographics, who said he was interviewed by a federal regulator.
Dafaallah left OCB a few years ago to start his own company and has been competing with OCB since.
Smaller players such as Pacific Coast specialize in printing blueprints, renderings and other documents for architects, engineers and construction companies.
Consolidated and OCB serve that niche too, and offer a wide range of other services, including digital color, facilities management and sales of large format copiers and other supplies.
The proposed Consolidated buy “would have an impact on all of us,” said Ralph Cruz, owner of Eastlake Graphics of Irvine, which has about 12 workers and annual sales of about $1.3 million.
“They have more buying power from the standpoint of equipment and paper,” said Cruz, who said he spoke with a federal regulator last week. “We wouldn’t be able to compete with them if they were to lower their prices.”
OCB president Chuck Hayes said his company has complied with regulators, who he said have found nothing wrong to date.
“It bothers me that this continues to go on,” Hayes said.
OCB deals with the “entire spectrum” of businesses in OC, not just “architects and engineers,” he said.
“OCB has been in business for 75 years and our reputation has been based on integrity and it will continue to be so,” Hayes said.
The tension, which has pitted big against small, has been brewing for a while.
American has been buying reprographic businesses in OC for several years. Earlier this year, the company bought Irvine’s Universal Reprographics South Inc., which was folded into OCB. In 1999, OCB acquired Fullerton Blueprint, which took on the OCB name.
The Consolidated case has a twist.
Greg Lundeen,a former president at Consolidated who was part of the team that sold to Lason in the late 1990s,said he wanted to buy the business back. He said he was outbid by American, which now is first in line to buy Consolidated in bankruptcy proceedings.
Lundeen said he left Consolidated in January and filed a complaint about American and OCB with regulators later that month.
“My position, as I stated to the FTC, was if the merger was allowed to occur that some 80%-plus of the reprographics work being generated within Orange County would then be done by a single firm, or two firms owned by the same company,” said Lundeen, who said he worked for Consolidated for 34 years. “I’m concerned about the employees of my former company (who may lose their jobs) and the impact on the clients.”
Lundeen said he still wants to buy the company out of bankruptcy and is “pursuing all options.”
OCB’s Hayes reiterated that “we’re not buying Consolidated, American Reprograph-ics is,” a distinction lost on the company’s smaller rivals.
“There’s absolutely no monopolies going on anywhere with American Reprographics in the country,” Hayes said.
Instead, Hayes said, “Why wouldn’t somebody be more concerned about Xerox or Kinko’s?”
“The fact of the matter is, printing itself is a huge industry and now everybody has chosen to get into it with new technologies,” he said. “One of our biggest competitors is Xerox. But nobody seems to go after them.”
