A number of planned sales of Ovato business units have been completed with the Australian Competition and Consumer Commission (ACCC) approving the sale of its Australian retail distribution business to magazine publisher, Are Media, for $10 million.
Plans are also afoot to sell Ovato’s New Zealand retail distribution business for $5 million to Are Media, which is a 16.4 per cent shareholder in Ovato and a major customer, once NZ regulators approve the sale with this expected to be completed by August 30.
In other changes, Ovato Creative Services, Ovato Technology, Ovato Communications and a related entity in India have also been sold to Hannan family business, Ballygriffin Holdings, for $9 million.
The company also closed down its residential distribution business at the end of July which it says will bring a positive contribution to Ovato’s bottom line going forward.
The ACCC ruled the sale of the Australian retail distribution arm could proceed on the grounds that it would not give Are Media a significant competitive advantage.
ACCC chair Rod Sims said a key concern was the impact the sale may have on competing magazine publishers and whether they would be effected by not having access to competitive distribution services.
“Consistent with the ACCC’s findings when it considered Bauer acquiring Pacific Magazines in 2020, circulation and revenue of most magazines continue to decline significantly, and many titles have closed over recent years,” Sims said.
“Historical data showed that consumers that still buy magazines have a high level of loyalty to particular titles, meaning that very few consumers would switch to an Are Media publication if it favoured distribution of its own magazines over its rivals’ publications.
“The ACCC concluded that Are Media would have insufficient incentive to favour distribution of its own publications over those of other publishers.”
In a go-forward statement to the Australian Securities Exchange, Ovato CEO James Hannan said the funds generated from the business sales will allow Ovato to focus on what it does best – printing.
“Existing print offers in magazines, catalogues, commercial work, packaging and books will be the immediate focus,” he said.
“Operational excellence across these business units presents significant efficiencies and upside. A single and clear focus will help ensure that is achieved. Ovato is reverting to its core.
“Ovato remains committed to continuing to develop a culture that supports its people and clients, while striving for operational excellence.”
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