Ovato EGM next month for ORD sale & new loan
Ovato will hold an EGM on 15 July for shareholders to vote on the proposed sale of the retail distribution business, and on a new $2.5m short-term loan from Are Media.
The country’s biggest magazine publisher, and major Ovato shareholder Are Media, is aiming to buy Ovato Retail Distribution Australia and Ovato Retail Distribution New Zealand.
Sale price has been set at $15m, plus the $27m debt of the business, that was formerly known as Gordon & Gotch, and is the region’s biggest magazine distributor. It distributes some 2700 magazines in Australia, and 1800 in New Zealand.
The number of magazines distributed in Australia and New Zealand have shrunk by a third over the last four years – from 226 million in 2018 to150 million last year, with the last two years both seeing 15 per cent declines.
Some 40 per cent of revenue in the business comes from Are Media titles. Overall revenue has diminished from $72m in 2018 to an estimated $60m this year. EBIT though has increased by 50 per cent over the same period, from $4.3m to $7m.
The deal, and the $9m sale of Ovato’s marketing services businesses into a new Hannan entity, leaves Ovato fully-focused on print.
For Are Media it will create a vertically integrated business: it owns its publishing business, it owns 16.38 per cent of Ovato, its parent company Mercury Capital owns Webstar in New Zealand, and it will own the retail distribution business in both countries.
The new $2.5m interest-free loan proposal from Are Media Holdco is on top of the existing $2.3m loan from the same entity. It will be used to make priority payments to employees, to enhance the working capital, to repay debt, and to assist in restructuring.
The loan will be repayable when the deal with Are Media for the Retail Distribution business goes through, 10 days after if it doesn’t, or six months after the date of the loan.
Independent experts brought in to assess the sale and the loan have concluded that both are in the interests of Ovato shareholders.
The EGM will be an online event, due to the ongoing uncertainty over Covid.