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.
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