Australia’s second and third biggest printers, IPMG and Blue Star, will merge by May 30 to form a company with revenue exceeding $800m, in the biggest shakeup of the industry since Geon’s collapse.
After four or five months of discussions, the two companies have entered into a heads of agreement to merge their printing operations, in a deal that will bring together senior management from both businesses.
The merger will see the combined entity leapfrog PMP – whose revenue dipped below $1bn last financial year – as the country's biggest printer. The new company will have major operations along the eastern seaboard, with huge web printing capacity, a major sheetfed operation, digital printing and Blue Star's new augmented reality division.
It includes the new $130m IPMG Warwick Farm web offset facility opened just a year ago.
IPMG’s non-print businesses, such as digital and property holdings, will not be part of the merged company and will remain wholly owned by the Hannan family.
Blue Star managing director Geoff Selig says the merged company will be a 50/50 split between IPMG and Blue Star. He says leadership, management structure and a name for the group are still to be worked out.
“IPMG operate through various brands like Hannan Print, while we tend to keep ours consistent, so we will see how that ends up working out,” he says.
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He says, at this point, the plan is for operations of both companies to continue as usual with all plants remaining open and all staff retained.
However, IPMG executive chairman Michael Hannan there is likely to be staff and equipment rationalisations at some point, particularly the phasing out of numerous old machines owned by both firms.
“There is significant overcapacity in the industry and inevitably when you become more efficient in a merger like this you need to lose staff and equipment, but I’m a big believer in doing this by natural attrition and using redundancies only as a last resort,” he says.
“Older equipment needs to be retired and there may be some redundant sites.”
Hannan says more than a dozen working groups have been set up to examine every part of the business, including the management structure, and will report back by mid-May so the company can move to finalise the deal.
“When we got all the people from these groups around a table, I realised the quality and depth of the management the two companies have,” he says.
Selig says the printing industry is going through significant structural change and both his company and IPMG want to be leaders in this aspect of its ongoing consolidation.
“Being a strong player will become more important in the industry and it will become critical to have strong partnerships,” he says.
Selig says it is hard to know where the industry’s consolidation will go from here but, on his part, the new company would certainly explore other acquisition and merger opportunities that would benefit it, though it still has a lot of work to do for the time being.
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Hannan says the merger will lead meaningful industry consolidation, which will benefit both the industry and its customers.
“I hope this will be a catalyst for other large mergers in the near future, because it’s necessary for the industry,” he says.
“This is an industry which faces challenges with overcapacity and high costs. As a consequence, there are any number of deals that could be done but this one is not just a merger of businesses that complement each other, it is a merger of minds and culture and that’s what makes it compelling for us.
“I’ve done a lot of deals and I’ve never seen one as good as this. It’s very exciting.”
Hannan adds that the merger is perfect from a business offering point of view also, because there is very little crossover between the two companies’ operations.
“Both Blue Star and IPMG are financially strong companies with minimal debt, focused on providing our customers with exceptional quality of service and integrity,” he says.
“The merged entity will have at its disposal the most talented and qualified staff in the industry; the most efficient and productive line up of equipment; the most compelling breadth of service offering; and an amazing client list to make an old printer very proud.”
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Selig says in addition to it becoming Australia’s biggest printer, the combined company will have a strong balance sheet and culture that will allow it to continue investing in new equipment, technology and innovation to stay relevant and competitive.
“You don’t get a better combination of businesses in Blue Star and IPMG. We are highly complementary companies and have a strong reputation for the way we do business,” he says.
“Both companies have been built over decades on extremely high levels of customer service, responsiveness and exceptional quality.
“I feel strongly that our compelling value proposition will serve our customers and people very well.”
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