What happened

Shares of R.R. Donnelley & Sons (RRD) popped this morning after the printing and marketing company received a buyout offer from its largest shareholder for a price that represents a whopping 52% jump from the stock's Monday's closing price. R.R. Donnelley shares were trading up 38% as of 11:35 a.m. EDT.

So what

In a regulatory filing dated Oct. 12, R.R. Donnelley revealed it has received a nonbinding offer from Chatham Asset Management to acquire the company at a price of $7.50 per share. The private investment firm that currently owns 14.9% shares and 41.4% debt in R.R. Donnelley has been chasing the company for more than a year now to restructure and unlock greater value for shareholders. 

In late September, for example, Chatham Asset Management urged R.R. Donnelley to prevent the slide in the stock price and boost its value through a strategic business review and initiatives like selling noncore assets, reducing costs, better aligning compensation with performance, implementing a better capital allocation policy, and appointing a new chairman and members to the board of directors. The firm even said it believed these initiatives could boost R.R. Donnelley's share price to $13 or higher. Although the stock has recovered sharply since 2020, it had lost almost a quarter of its value since June before today's jump. 

A businessperson giving a presentation at a meeting.

Image source: Getty Images.

In its letter to R.R. Donnelley today, Chatham Asset Management stated it believes the company should be sold to maximize shareholder value, as it "does not appear capable of achieving full and fair value as a public company under the current Board and management."

Chatham Asset Management has not only offered to buy the outstanding shares in R.R. Donnelley for $7.50 a share but also offered to convert debt worth $575 million into equity and infuse up to $250 million into the new company. The firm estimates this would reduce R.R. Donnelley's debt as of June 30 by almost 23%. High debt has been among R.R. Donnelley's biggest concerns -- it had total debt worth $1.5 billion as of June 30 but generated negative cash from operations during the quarter and had cash worth only $237.2 million in hand.

Now what

Given Chatham Asset Management's offer, it's not surprising to see R.R. Donnelley surge today -- the stock's hovering around $6.8 a share as of this writing. Remember, though, Chatham Asset Management has only proposed an offer; R.R. Donnelley hasn't responded yet. But given that Chatham Asset Management is now keen to acquire R.R. Donnelley and saw the stock to be worth more than $13 a share barely weeks ago, investor interest in it could remain high.