Australian printing giant, Ovato, has announced it is planning to raise $40 million through a rights issue and the closure of its Melbourne print site at Clayton, with 300 jobs to go.
The scheme is still to be approved by the Supreme Court of NSW and creditors who are due to meet on November 30.
Majority Ovato shareholder, the Hannan family, and a Mercury Capital entity Are Media Pty Ltd, will underwrite $35 million of the rights issue, with the plan to also include the closure of the Clayton print plant and 300 employee redundancies.
The news comes after the company announced in August this year that it was seeking to have its Enterprise Bargaining Agreement terminated to decrease redundancy payouts and ensure the future viability of the company.
Ovato CEO Kevin Slaven announced the move in a statement today and said the restructure will allow the company to return to profitability and ensure that 900 jobs would be saved.
“Print-based industries have been significantly affected in recent years and the COVID-19 pandemic has increased the pain this year for many parts of our group,” Slaven said.
“Our industry has gone about as far as it can with mergers and consolidations in the last five years. Ovato has suffered losses for several years because of the costs of measures to meet the reduced demand for printed communications. This restructure allows for the company to get back to profitability and a sustainable future.
“Unfortunately, it means that over 300 employees will lose their jobs.
“However, the restructure will save 900 other jobs because the company would be facing an uncertain future without the restructure we are proposing.
“The proposed new equity, underwritten by two significant players in the printing and media sectors, together with the indicative support of our major suppliers and financiers to restructure our balance sheet, provides the foundation for a viable, sustainable and exciting future for our group.
“Critical to the implementation of the scheme, there will be no impact on our customers or all other suppliers outside of the scheme, other than the positive impact of providing the company with a stronger balance sheet and a viable, sustainable future. Our view, and the view of the independent expert, is that without this scheme, the outlook for the whole group is unpalatable. We have searched for alternative solutions to the massive disruption in our industry, but they were unworkable.
“The scheme will reduce our cost base, make us more sustainable and provide customers, suppliers and the 900 remaining staff certainty around a viable and profitable future.”
Ovato operates in Australia and New Zealand with print, distribution and marketing services.
It made a net loss after tax of $108.8 million last financial year, on revenue of $539.3 million. Creditors will meet on November 30.
It says all Ovato businesses outside of the Australian print operations are unaffected by the restructure and that many hundreds of jobs in the downstream distribution industry will not be affected.
Comment below to have your say on this story.
If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.
Sign up to the Sprinter newsletter
No surprise here – I can not believe it’s has taken this long to make the call. They will be throwing money down a hole unless they change their ways in the future.
Money down a hole? They are broke and don’t have enough cash to pay their redundancies. This is horrendous. The 17th most wealthiest family in Australia are expecting the tax payers to pay the redundancies via FEG!! Disgraceful behaviour. How can customers support this?
Can someone explain to me how OVT got away on the 29th of October with stating to the ASX that they had Estimated Cash Available of $43.797 million when in actual fact $24.6 million of it was for Debtor Financing for which there was no invoices to draw against?
That is not cash available and shouldn’t be considered cashflow headroom? Please explain?
Shouldn’t that be addressed before raising $40m for a bail out?
Why would a PE invest here when the money is being used to primarily finance redundancies? Do OVT even have enough cash without this effort to pay for 300 redundancies? At the $70k a head it doesn’t look that way? Sad for the employees and for the PE considering it without looking deeply.
No they don’t have the money to pay the redundancies we have been told we are gone mid December and to apply for fegs
After receiving $25m-$30m in government job keeper subsidies why now should the creditors be marginalised, including staff being left for FEG to payout (more government money!) and government entities being asked to forgive tax debts. All so they can recapitalise and continue to operate, and the major shareholder, one of Australia’s wealthiest families, can enjoy the upside.
When every other company in Australia has had to pay its own costs (tax, restructuring etc) through this COVID period to ensure they remain sustainable businesses and good corporate citizens.
Who is supplying the paper here? This is a zombie company that can not be solvent, surely?
Did you miss the part that mentions creditors only get 50 cents in the dollar? I have been a fan of the Hannans, and worked for them and was always impressed by the way they respected suppliers. No more. This is a con.
The really sad thing here is that the Hannans stopped Geon from enacting exactly this kind of a deal. They rightfully marshalled the industry suppliers to stop companies from screwing the rest of us by not paying their debts. And now this?
I worked for them at the time. Was genuine leadership. This is an outrageous ploy. This is purely to avoid going into administration and trying to preserve the Hannan’s shareholdings and fund it via creditors and ultimately the government.
What a very short memory the Hannan/IPMG group H as….same on you read this if you dont remember…… https://sprinter.com.au…
In the days that followed, suppliers decided enough was enough. Printers, including IPMG chief executive Stephen Anstice, also spoke of a boycott.
“We cannot conceive how the reported plan of KKR and Allegro to emerge as the new owners of Geon can be allowed without all creditors being paid and have called on the PIAA to explore what action can be taken to protect the suppliers and staff of Geon,” said Anstice.
“IPMG is considering instituting a policy where we will not support any suppliers who decide to do business with Geon should it re-emerge under the ownership of KKR and Allegro leaving creditors unpaid,” said Anstice.
Have a read Michael Hannan !!!!!!
Well said Gavin… here is the link again in case it didn’t work for some people.
Ovato had deep trouble before COVID but are trying to wash this through under the current provisions. Why should all of us as tax payers pay their staff obligations? Can’t James just sell his $9m house and cough it up?
https://sprinter.com.au/geon-the-story-behind-industrys-black-saga/
What’s good for the goose????