Is Chicago the new Madison Avenue?

According to the Daily Herald and press releases issued by Des Plaines, Illinois-based graphic design and branding agency Schawk, Inc. (NYSE:SGK), acquisitions are underway that will make Schawk the single largest graphic arts firm in the United States, United Kingdom, and Asia.

On Monday Schawk announced a definitive agreement to purchase New York-based Seven Worldwide, Inc., formerly known as Applied Graphics Technologies, Inc. (AGT). Seven Worldwide provides industry-specific marketing execution and publishing solutions to clients in the consumer goods, retail, advertising, entertainment and publishing markets on a global basis. Headquartered in New York, Seven Worldwide serves clients from offices in North America, Europe, Australia and Asia. Based on Schawk's and Seven Worldwide's current 2004 forecast, the revenues of the combined businesses would be $630 million.

The acquisition price is $191 million, with $122.4 million in cash and $68.6 million in Schawk stock (four million shares of Schawk common stock at $17.15 per share). The cash portion of the purchase price will be financed from borrowings under a new $100 million revolving credit facility and from a $50 million private placement of long-term fixed rate debt.

If the acquisition receives approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions it will close effective January 31, 2005.

On December 6 Schawk announced that it had entered into a non-binding agreement to acquire the assets of Weir Holdings Limited and its subsidiary companies, better known under the operating name Winnetts. Winnets is a $40 million dollar provider of graphics and value chain services to consumer products companies, retailers and major print groups in the United States, United Kingdom, South Africa, Asia, South America, and Australia.

Winnetts has approximately $40 million in annual sales with operations in the United Kingdom, Belgium and Spain. The deal is expected to close December 31, 2004.

With the acquisitions Schawk expects a combined annual income of $630 million.

Said David A. Schawk, president and chief executive officer:  “Our service footprint will be unmatched across a variety of dimensions, including best practice-based expertise, capabilities, geographies, industries and technologies.”

”With a shared vision of providing an array of comprehensive, or end-to-end, solutions to industry-leading clients,” continued Schawk. “Schawk and Seven Worldwide are creating an enterprise that will become the industry standard. Our combination will provide exceptional products and services from locations in the United States, Canada, Asia, the United Kingdom, Europe and, most recently, India.”

With both Winnetts and Seven Worldwide coming into the Schawk camp, Schawk will be the largest graphic design firm in the United States, United Kingdom, and Asia.

”And we’re working on South America,” said Schawk told Chicago’s Daily Herald. “We still have several acquisitions in the pipeline. We’re working on brand strategy consulting, helping our clients bring their brands to the market.”

At market open this morning Schawk stock was up $1.25 per share, to $18.50 from Friday’s close of $17.25. Trading volume was moderate 10,000 as of 3:00 PM Eastern.