The merger between Australia’s second and third biggest printers that would have created an $800m-a-year behemoth to rival PMP is dead in the water.
IPMG and Blue Star jointly announced last night that the deal is in tatters and discussions have been called off for good just 72 days after a heads of agreement was signed on March 30.
The companies say while ‘the benefits of merging these businesses are significant and that there is a need for meaningful industry rationalisation’, the due diligence process, involving more than a dozen working groups set up to examine every part of the businesses, determined ‘the cost to rationalise the businesses and the risks associated with the implementation outweigh the expected benefits’.
Merger talks were already behind schedule with the expected completion date for the deal passing almost two weeks ago on May 30, and senior executives earlier said it would probably take at least an extra month.
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Blue Star managing director Geoff Selig does not feel it is appropriate to get into the specifics of why the deal collapsed, instead telling ProPrint that sometimes things just don’t go through.
“I know when you sign a heads of agreement everyone expects it to just happen, but you cover a lot of ground and go through a lot of information in due diligence and these things don’t always work out,” he says.
“It is disappointing considering the amount of work everyone has put in, but these businesses have a lot of good people in them and I am confident they will both continue to do well.”
It seems Blue Star has decided to drive industry consolidation by itself, snapping up mailhouse iGroup Australia a few days ago and signing a heads of agreement with STI Group for its Australian business – Reg Hammond’s old company – in April.
At the time of signing the heads of agreement, both Selig and IPMG executive chairman Michael Hannan were ecstatic about the amalgamation of their print businesses and hoping it would be a catalyst for desperately needed industry consolidation.
Hannan said he had done a lot of deals in his life, but he had ‘never seen one as good as this. It’s very exciting.’
“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,” he said at the time.
Back in March Selig said the combined company would have a strong balance sheet and culture that would 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 said.
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The wider industry reacted with cautious optimism and smaller printers relished the chance to pursue smaller clients while the big end of town went after bigger ones.
Look Print chief executive and PIAA president David Leach said: “Anything that stops printers bashing each other over the head with a dollar sign is great for the industry.”
“You need a lot of money and equipment to go after huge clients and this will let them do that better. The smaller market will be left to the smaller printers that are better suited to servicing it.”
However today the deal is off, and both companies which are profitable in themselves, will now resume competitive hostilities. Both are in sheetfed printing and both in webfed printing, and both operate along the east coast.
In sales turnover terms they are broadly similar, with IPMG in front, both racking up around $400m in print and related sales last year.
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