When the Selig family made a high-profile return to the industry last year, their arrival was met with surprise. It wasn’t the first time they’d got this reaction. There was a similar stir when the family sold out of print more than a decade ago. In 2007, there was plenty of buzz when Geoff Selig left his role as Australian chief executive of Blue Star, having been at the helm throughout the maelstrom of consolida-tion and private equity investment that epitomised the past decade.
When pressed on why the Selig clan opted to sell their printing interests, or why he decided to leave print four years ago, Geoff gives the same reason as why the family returned last year: “It was time.”
Early June 2010: Geoff Selig and his brother Paul had just bought the assets of troubled company Quality Print Group. While Geoff won’t be drawn into conver-sations about the old firm, its monumental fall from grace is well documented.
The western Sydney-based heatset web printer, already on the industry blacklist, had called in liquidators with a liabilities blow-out of at least a $12 million. Unsecured creditors topped $8 million, including an infamous $3.5m debt to CPI.
In a deal liquidators Rodgers Reidy stressed was “an arm’s length transaction”, the Selig family took over the failed firm’s assets, staff and premises. The first thing to go under new management was the toxic brand: CaxtonWeb was born.
(For anyone not up on their printing history, William Caxton was one of the masters of the craft. In the 1400s, he introduced the first printing press to England and produced the first book ever printed in the country, an edition of Chaucer’s The Canterbury Tales, in 1476.)
Even with a new name above the door in Huntingwood and new leadership in the shape of former Blue Star chief operating officer Mike Shannon, there was a momentous turnaround task ahead. It is bearing fruit more than a year later.
When ProPrint first sat down with Geoff Selig, it was October 2010, a few months after the keys had been handed over.
Selig is a considered character, who weighs up his answers before delivering them, often with a dose of business-speak. (On taking over the Quality Print assets, Selig told ProPrint he liked “the contemporary equipment profile” and wanted to “leverage the underlying strengths of the business to recalibrate it and take it to a stronger market position”.)
Since leaving print, Selig has pursued other interests, including managing the family’s grazing property in the Southern Tablelands town of Crookwell, as well his role as president of the NSW Liberal party.
So, last October, with the ink freshly dried on the sale contract, Selig spoke to ProPrint about the reasoning behind the Quality Print buyout and why the family returned to the industry.
“I suppose it’s an industry that we know well. It’s human nature that at times, you gravitate toward things you know and understand. The more you understand an industry, the more you have a level of appreciation for the risks.”
He says the family had been approached a number of times about investing back into print, but said Quality Print was the first one to take their fancy, with the “right bones in terms of production footprint, self-sufficiency, location and size”.
“We felt the web offset space was more appealing for a number of reasons, as distinct from the digital space, where there’s a proliferation of suppliers, and sheetfed, which is somewhat under siege.”
There was plenty about the web offset company that caught the eye of this third-generation printer – “it’s a business that we can really wrap our arms around”. The decision to take the plunge was helped along by the family’s natural affinity for the trade, but make no mistake, this is a commercial venture.
“While we really enjoy the industry and appreciate the sector issues the industry is experiencing, at a pure level we did see a genuine opportunity by taking a business with all those qualities, and complement-ing those with our own management team, with our own leadership and a much stronger financial position.”
He adds: “We didn’t just get back into printing for the fun of it.”
There are plenty of industries that typically attract a much higher rate of return than our margin-maligned sector. It takes more than just business acumen, a steady hand and a willingness for capital expenditure to make a decent return (or even just survive – plenty of businesses have proved that). A passion for print helps, and with the Seligs, this runs deep.
When Geoff and Paul’s grandfather, Oscar Selig, returned from WWI in 1921, he started up a local newspaper in Balmain, Sydney. A compositor by trade, Oscar built up The Link newspaper to span the neighbouring suburbs of Rozelle and Glebe. Following Oscar’s stroke, his only son, Gordon, took up the challenge of running the family business. It was Gordon Selig who spearheaded Link Printing’s move into the commercial space, having sold off the newspaper in 1965.
Eventually, all three sons entered the business. Like their father, they first dabbled in other fields; both Geoff and Paul have financial tertiary qualifications.
Balmain is, as Geoff Selig puts it, “a lovely place to live but a tough place to do business”. This drove them to Silverwater, not far from the current home of Blue Star.
But enough has been written elsewhere about that private equity-backed group. This is about the creation of CaxtonWeb, which is still one of the biggest printing company launches in Australia in recent years. However, when you weigh the birth of Caxton against the scale of takeover Selig was involved with not so long ago, it seems like small potatoes.
In August 2011, more than a year after the buyout, Selig sat down with ProPrint again. He was quick to point out that the scale of the CaxtonWeb takeover is more in keeping with the general trend in mergers & acquisitions (M&A) today. Now, a mid-tier web printer with fewer than 80 staff ranks as one of the most significant takeovers of recent times. The glory days of M&A activity in print are long gone. Gone, but not forgotten, says Selig. Instead, M&A has entered a new phase.
“The market is a little different now. There is more consolidation and acquisition activity between mid-tier operatives than of larger companies acquiring mid-tier companies, like there was seven to eight years ago.
“The larger companies, to some extent, have moved to rationalise their operations. Whereas among the mid-tier, who were consolidated into larger businesses before, there has been a lot of movement at that level of companies coming together and working out their own path forward in the absence of a large group to acquire them.”
With under 80 staff, CaxtonWeb is decidedly a member of this mid-tier. But the nature of the web offset market means it has to punch above its weight against the heatset heavy hitters of PMP and IPMG. Meanwhile, the downward pressure on magazine and catalogue run lengths means it must watch for sheetfed printers nipping at its heels. The web offset market is not over-saturated with suppliers to such as a degree as in the sheetfed space, but that’s not to say capacity is in line with demand. Publishing work has its own unique pressures. The number of magazine pages being printed is at the mercy of discretionary marketing budgets, which continue to be squeezed by the general economic uncertainty and spread thin by the rise of competing channels.
None of this was a surprise to Selig when the family decided to set up CaxtonWeb.
“It is fair to say it was an acquisition that was against the tide of common thinking. Why would you buy back into a sector that is highly competitive in a struggling economy, a sector that in real terms is probably in decline? Some of those observations are absolutely right.
“But the adjunct to that is this market does, through consolidation and rational-isation, throw up opportunities. We can leverage off the base CaxtonWeb business to undertake further investments in complementary acquisitions or technology, whether they are integrated into our business or standalone acquisitions.”
Selig says that while the company will continue to use technology to remain at the forefront of the market, “we certainly have no plans to walk out tomorrow and invest in new web offset technology”.
The past year has involved some smaller investments. One of the largest was its implementation of Fujifilm XMF Remote R6 – the first in the country. This is a soft proofing module of the vendor’s XMF workflow, which was already in place throughout Caxton. This kind of tech is a must in the modern publishing world, where customers demand high levels of quality control. Furthermore, soft proofing suits the standardised nature of magazine work. At Caxton, jobs are mostly restricted to 8pp and 16pp sections of similar sizes.
But apart from a bit of refurnishing to improve the overall workflow aesthetic, it’s unlikely there will be any new heavy metal decorating the halls at Huntingwood any time soon.
Caxton is well serviced with webs. The site’s foundation is its pair of late-model 16pp Goss M600 presses. There is also a six-colour Heidelberg Speedmaster CD 102 with coater. Bindery equipment – so essential to any magazine business – is represented by three Muller Martini saddlestitchers and a high-spec 24-station Wohlenberg perfect binding line.
This printing and finishing artillery was a big selling point in the new owners’ decision to buy. On paper, the equipment list looked top notch, but in reality, it could have been better maintained. The kit needed was some good old-fashioned TLC.
“We knew they were very good assets. We also knew that they had been somewhat neglected over a period of time. So one of the many operational initiatives over the past 12 months has been to put a significant amount of money – over $1 million – into what is crudely called ‘repairs and maintenance’. For us, it was an investment to bring all that gear up to where it should be. It is very good gear with a very long life cycle.”
Having well-oiled web machinery is good practice. But even below-standard web presses might have attracted the new buyers – specifically because they were web offset. The Seligs were not keen to dive back into commercial print with a pure sheetfed offering. The reason? While litho sheetfed presses aren’t cheap, their price is low enough that a vast number of entrepreneurs are at play in this space. The price of a web press, meanwhile, creates a much higher barrier to entry.
Barrier to entry
“If you are not in the web offset space already, or if you are a sheetfed player wanting to move into the web offset space, there is a significant investment in equipment technology. Running in parallel is the necessity to have significantly more working capital tied up in paper and a requirement to have a different skill set in terms of managing the business and managing the workflow.
“So there is a protection on a pure technology level, in as much as that web offset gear is not inexpensive to buy or relocate or recommission. But equally, there is the added barriers of the skill set and the additional working capital that sits around a web offset operation,” he says.
When the new owners were looking over the company with a microscope, pre-acquisition, there was one aspect they couldn’t fully gauge until they bought in: the workforce. While they appointed a few key staff members from the past – namely Mike Shannon as CaxtonWeb’s managing director, Hugh Chisholm as sales and marketing manager and Mal Winzer as production manager – the bulk of the team would comprise ex Quality Print people.
Selig says the people have been the best surprise of all.
“We have been delighted at the quality of the people we have employed since day one, given that hardly any of them were known to us at all when we offered 58 of them a job just over a year ago,” says Selig.
“On the day we acquired the business, the owner and a number of his manage-ment team left, but, generally speaking, we employed all of the staff. We have put on an additional 14 since we acquired the business. Culturally, it is a far more cohesive and customer focused business. It is nice environment for people to work in.”
What about suppliers? When Quality Print went belly up, it left behind a trail of bad debts and left a bad taste in the industry’s mouth.
But the Seligs had their own reputation to bank on. When Geoff first spoke to ProPrint last year, a few months after taking over, he said the new team had already had “a really positive response from suppliers”.
“A lot of the suppliers that we’re now engaged with, we have dealt with over many years. We didn’t need to convince them about our credentials or our ethics or our credit-worthiness. There’s a level of trust that’s been built up over a long period of time, and we are firm believers that a very strong supply base is critically important to the success of our business.
“I think there was an appreciation from suppliers [to the previous business] that the position they found themselves in was not of Caxton’s making. To the contrary, many of them were delighted with the fact that while there might have been some pain ahead for them in terms of the previous business, that the ongoing patronage of the new business under our ownership at least eased some of the pain.”
If you have the right staff, supportive suppliers, access to capital for investment and the correct technological bag of tricks, there’s only one other thing you’ll need to make a good go of the magazine and catalogue market.
But it’s a big thing: customers. Selig & co inherited some great gear and good staff, but they also inherited the old owners’ questionable reputation.
Fewer, bigger clients
There has been real focus here, post-acquisition. Publishing, by its nature, is a fewer, bigger approach to accounts. A handful of clients can make the difference between success and failure, so it’s vital to keep as many as possible on-board. The new owners did start up with enough work to keep the presses running, of course, but Selig says there was a lot more to do to get the business where it needed to be.
He says the team “are pleased with our progress to date”. When the business changed hands, Selig readily accepted that “there were a number of customers who had fallen out or who had drifted away from the company in the 12 or 18 months prior to our acquisition”.
The new team’s credentials helped settle the nerves of publishers who had watched the old firm implode, as well as winning back those who had pulled the plug.
“For large customers where print is their business, to know their major supplier is capable, stable, financially sound and reputable is a great comfort,” said Selig.
Today, more than a year since the buyout, the team have continued to notch up wins. Selig nods to the efforts of the whole team, new and old, under Mike Shannon’s stewardship.
“The efforts of all of our people are coming to fruition. They come to fruition when I talk to customers who were customers of the previous business. I had the opportunity to speak with a number of these customers before we acquired the business and they very clearly and candidly articulated what they weren’t happy about. To sit in front of those customers today, 12 months later, and for them to comment that they can’t believe the positive transformation in the business since we took over – that is ultimate validation.”
As an example, Selig points to one customer who, after seeing the changes at the print house, shifted another couple of million dollars of spend back on top of millions already being spent with Caxton.
Listening to Selig’s measured but upbeat opinion of the company, it would be easy to forget he was talking about what was, essentially, a risky takeover of a distressed company in a difficult market.
It hasn’t all gone swimmingly. It certainly didn’t help that one of the company’s major supply lines was broken following the Japanese disaster. Nippon Paper Industries, one of the major suppliers of magazine grades to Australasian heatset web printers, suffered major damage to several of its plants back in March. Caxton managed to quickly up its intake of European grades, but it could have been a blow to the turnaround strategy, which lists proper stock management as a guiding principle.
The pressure points on print are well known. The magazine market is very tough. Only this month, the market’s leading publisher, ACP Magazines, revealed an 18.5% drop in full-year earnings. While it would be blunt to infer this squeeze at the top end of town means equally dismal figures are being recorded at the smaller-run, niche end of the magazine publishing sector that feeds Caxton’s webs, it speaks volumes about the challenging conditions.
But Selig is an optimist. “Not withstanding the difficulties of the sector and the broader economy – it is tough going for everybody – there’s a general sense that with satisfied customers, good relationships with suppliers and a really good culture internally, what we are doing is ultimately right.
“Printing is still a very large industry, of which web offset is a large sector. Our business and our growth aspirations are fairly modest, so we believe there is a place for us.”
There’s only one question still niggling. Even if the sums all add up, re-entering any part of the print market remains a risky play. Was there more than just a com-mercial agenda that drove the Seligs to put so much on the line to buy back into print?
Of course there was. “We just love the printing industry,” says Selig.
“It’s a complex space. It’s a demanding space. But it’s a great industry with a lot of talented and well-grounded people. The industry has been under serious pressure, but the resilience and commitment of the workforce has been fairly constant. There’s a lot to be admired.
“It’s good to be back.”
Markets Magazines and catalogues
Owners Geoff and Paul Selig
Located Huntingwood, Sydney
Major kit Two late-model 16pp Goss M600 presses; six-colour Heidelberg Speedmaster CD 102 with coater; three Muller Martini saddlestitchers; 24-station Wohlenberg perfect binding line
Business briefing – Caxton Web
· Later that month, Quality called in liquidators under a mountain of debt.
· With the exception of management, the Seligs offered jobs to 58 of Quality’s staff, as well as appointing former Blue Star chief operating officer Mike Shannon, along with Hugh Chisholm and Mal Winzer.
· The machinery, including a pair of Goss M600 web presses along with high-end finishing equipment, hadn’t been well looked after. The new team has spent more than $1 million on repairs and maintenance to bring the equipment list up to par.
· Other investments include implementing the country’s first Fujifilm XMF Remote R6 soft proofing system.
· The overall strategy, covering staff, suppliers and equipment maintenance, has helped put the web offset printer in good standing with customers, and it has notched up some multimillion dollar wins.
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