Print Solutions Magazine

After a disagreement involving the control and management structure of International Business Solutions Alliance LLC (IBSA), President and CEO Paul Keith has left the company. Mark McKinney, formerly IBSA’s executive vice president, is its new CEO, and the alliance is relocating its headquarters from Bowling Green, Ky., to Indianapolis.

Keith said he gave IBSA’s nine other, equal owners an “ultimatum” on April 17, giving them two weeks to consider a proposal that would have changed the alliance’s leadership.

“They didn’t go for it, and this was a management dispute that couldn’t be resolved,” said Keith, who had served as the main voice of IBSA since 2002, when it was formed so distributorships could compete with the majors for large medical buying group contracts, Fortune 500 accounts and government business. “I tried to force an idea through but couldn’t,” Keith said. “‘I told them, ‘Well, if this doesn’t pass, I’ve got to go.’” He said all of IBSA’s other owners asked him to remain with the alliance, and the decision to leave was his. When he left, owners voted to name McKinney CEO.

Mark Musgrave, senior vice president and CFO of IBSA and vice president and co-owner of IBSA affiliate Promotek, Danville, Ill., confirmed that Keith left on his own accord but cited a different impetus. “We were at a point where we needed to get to a bigger town with more employees and resources to draw from,” Musgrave said. “We wanted to go to Indianapolis, and Paul just didn’t choose to move.” He said moving IBSA’s headquarters should spark more involvement from the alliance’s 132 affiliates and 80 suppliers, mainly because Indianapolis is more accessible than Bowling Green. IBSA’s owners chose Indianapolis because of its proximity to owners’ offices and major affiliates, available office space and large talent pool, said John Heybach, IBSA’s COO.

The day after he gave the ultimatum, Keith said, he told IBSA’s five staff members about it and assured them of future employment regardless of whether they stayed with IBSA or left with him. Each resides in the Bowling Green area, and decided to leave as well. Keith said he gave them 2-week paid vacations, and that some will work at Bowling Green-based Best Business Systems, the distributorship he ran prior to launching IBSA.

Musgrave said IBSA already has replaced IBSA’s former staff with consultants in web development and database design, plus two people responsible for accounting and reporting. (Among other reports, IBSA sends monthly reports to affiliates about how much volume they move through the alliance’s suppliers.) “I think you’re going to see a leaner, more efficient company,” Musgrave said. “We started with the philosophy to sell and service national accounts, and that’s what we’re still doing. I don’t think we’ve ever been in a better position to move forward.”

Glenwood, Minn.-based distributorship American Solutions for Business also believes it is well positioned. American and IBSA have been jockeying for position in the medical market since both organizations won contracts last year from Novation, the largest volume group purchasing organization in the health care field. News of IBSA’s management change comes only days after American acquired Health Print Ltd., a $8 million division of Amarillo, Texas-based Graham Data Supplies Ltd. that specializes in hospital sales. American’s strategy to gain Novation business by acquiring a firm dedicated to medical-market sales is different from IBSA’s strategy of training distributors to sell to those accounts. In September 2004, 175 IBSA owners and salespeople met for Novation training in Dallas, where they became certified by IBSA to call on Novation facilities. A prerequisite for attending the training in Dallas was a score of 80 percent or higher on an online test administered by IBSA that covered medical industry topics.

Musgrave said IBSA will continue to attract and train distributors who can sell to medical accounts, but “health care business isn’t the sole focus of the alliance—we’re looking for distributors who are well-rounded and can focus on any market.” IBSA recently signed a single-source contract with FirstChoice Cooperative, a GPO located in Tyler, Texas. IBSA will supply a variety of printing, promotional items and technology solutions to FirstChoice’s 17,000 health care members. The technology component covers patient admitting solutions and bar coding and RFID technologies, including software and hardware, Musgrave said. IBSA officials estimate that the 3-year contract could be worth as much as $300 million annually to IBSA affiliates.

One of those affiliates, Rich Stienstra, president of distributorship BRIDGE Information Systems Inc., Arlington Heights, Ill., said he wasn’t contacted about IBSA’s management change prior to receiving an email about it Wednesday, the same day IBSA issued the press release on Keith’s departure. “I’m surprised it happened,” he said, “but Mark McKinney has been at the forefront of IBSA since the beginning. Paul Keith led the charge, and without his energy IBSA wouldn’t have happened, but Mark was right there with him.” Stienstra said he hasn’t talked to other IBSA affiliates or suppliers to assess their feelings about the change, but he expects them to applaud the alliance’s move to Indianapolis.

One affiliate applauding is Bonnie Boohaker, president of distributorship Innovative Business Products, Baton Rouge, La. “Indianapolis is more convenient and makes more sense because it’s closer to key affiliates,” she said. More importantly, Boohaker said, Mark McKinney will “run the operation very well, and I’m excited that he’s at the helm.” McKinney has helped Boohaker call on acute-care facilities and other health care accounts near Baton Rouge. “He and Paul [Keith] have different personalities—Paul is fast-moving and enthusiastic, and Mark is more laid-back and [contemplative],” she says. “I don’t think the change will have much impact on affiliates’ businesses or strategy.”

Meanwhile, Keith began a web site, www.paulkeith.com, to discuss his future plans. “I will be starting a new alliance, although the structure and goals of such an organization are still to be worked out,” the site says. Keith said he plans to sell his interest in IBSA, a requirement before he can start another company. He owns 20 of IBSA’s 190 units, he said, and met with an attorney to discuss drafting a non-disclosure agreement for prospective buyers of those units. Offers to buy the units would be subject to approval from IBSA’s other owners.

Though Keith has “every intention” to start a new alliance, he said, the issue is when he’ll be able to do that. He has a 2-year non-compete agreement with IBSA. (The agreement doesn’t prevent him from returning to his distributorship, Best Business Systems.) Keith said he’s “seeking release” of the agreement, and hopes IBSA’s other owners help him accomplish that. To waive the non-compete, the owners would have to “be grateful for what I handed them, but I don’t know how much gratitude is out there right now—not a lot,” Keith said, adding that he will wait until June 2007 if he must. He said a future alliance wouldn’t necessarily be in the printing industry because “I believe I can do this same thing in several markets.”

Keith emphasized that he has no ill feelings toward IBSA’s owners and equated the management conflict to a “marriage gone sour.” He said: “I wish them the best. There are nine smart, bright, energetic people left at IBSA, and there’s no reason their future shouldn’t be bright.”

Heybach, former vice president of national account sales, will report to McKinney as COO with responsibility for the company’s day-to-day operations. Reporting to Heybach will be Musgrave as senior vice president and CFO; Mike Luckett, as senior vice president of affiliate strategy and relations; and Roger Courson, senior vice president of supplier strategy and relations. Also reporting to Heybach will be Rodney White, vice president of health care sales based in Dallas, and Michelene Bajakian, national account executive based in Chicago. IBSA will continue to maintain and expand its sales offices in Chicago and Dallas.

Three Vallis Form Service plants closed operations April 18. The plants were part of Garland, Texas-based The Vallis Companies led by CEO Scott Metko. Located in Baltimore, Md., Cherryvale, Kan. and Chicago, the plants manufactured products such as direct mail, mailers, integrated products, labels, scratch-off products and business forms.

“All employees were just asked to leave at 1 p.m. [April 18],” said an angry employee who wished to remain anonymous and was answering phones at the Baltimore plant. They packed their belongings and left, and pending jobs with the manufacturer aren’t being processed, she said, adding that workers weren’t expecting the plants to close. The plants employed approximately 200 people; none was given a severance package, the employee said, adding she didn’t know the reason behind the move.

Metko couldn’t be reached for comment, but speaking on behalf of the company, Greg Bustin of Dallas-based consulting firm Bustin & Co., said the plants were closed primarily because they were in the forms business “which has been off in the first quarter of [2005].” The company considered several options before deciding to close them.

A press release issued April 21 from MLC Holding Corporation—which includes Vallis, Metro Label and other printing-related subsidiaries, said, “that it is discontinuing all operations related to the Vallis Company, effective immediately. This decision does not affect the other subsidiaries, which will continue to provide services to existing and new customers...MLC Holding Corporation will continue its plans to expand into growth markets and focus its economic resources on developing new opportunities within the printing industry.”

Dallas-based Metro Label will continue to operate. Last year, The Vallis Companies, which was founded in 1961, announced that it was broadening its services to attract and develop new relationships with distributors. It ranked No. 10 on Print Solutions’ 2005 Top 100 manufacturers list.

Cenveo™ Inc., Englewood, Colo., announced that it has retained Rothschild Inc. to assist its board in a thorough evaluation of its strategic alternatives. The law firms of Wachtell, Lipton, Rosen & Katz and Hogan & Hartson LLP also have been retained to advise in connection with the review. The board said that while it will review all options, there can be no assurance of any particular outcome.

Earlier, Burton Capital Management LLC, Greenwich, Conn., and other members of its group, increased ownership of Cenveo from 9.6 percent to approximately 10.8 percent. Robert G. Burton, Sr., chairman, CEO and managing member of Burton Capital Management, recently sent a letter to
Cenveo, expressing interest in directing the firm. He previously led a turnaround of Moore Corporation Limited, cutting more than $100 million from expenses before Wallace acquired Moore. (RR Donnelly later acquired Moore Wallace.) Cenveo reported a loss of $22.6 million for its first quarter.
The company said it was hurt by restructuring charges, including $8 million from closing one of its plants.

RR Donnelley & Sons Company, Chicago, announced the opening of a new logistics facility in Bolingbrook, Ill. The 661,000-square-foot building, which has 100 bays and parking for 300 semi-trailers, is designed to house the Logistics Control Center, a mail consolidation center, as well as the company’s rapidly expanding co-mailing, co-palletization, co-mingling and fulfillment operations.

Additionally, the company announced that it has signed a definitive agreement to acquire U.K.-based The Astron Group, which offers integrated, end-to-end document business process outsourcing solutions, in an all-cash deal, for approximately $990 million. The agreement is subject to regulatory approval and is expected to close this summer. The Astron Group employs more than 4,000 people across 70 locations globally, and expects approximately $550 million in revenue in 2005.

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