A massive operational restructuring lies ahead for the troubled printing company as US investor KKR Capstone and Sydney-based fund manager, Allegro were handed the company on a plate to save it from going into administration last Friday. Gresham PE passed it over to the financiers for a 'small' undisclosed sum, drawing a line under its disastrous involvement in the printing industry.
GEON will be restructured by the two companies 'special situations' group, which will take a hands-on management role. According to reports Jamie Bolton, KKR Capstone director will be involved in the restructuring. It would be unrealistic to expect there will be no loss of jobs.
The private equity ownership saga draws to an end with the revelation that GEON, whose earnings are now (as reported in the press) as less than $10 million per year, was headed for administration if no one picked it up. The dramatic drop in earnings from the estimated $60 million when Gresham Private Equity bought the company in 2007, illustrates the dire straits of the company, which is the largest sheetfed producer in the region.
At the time of Gresham’s initial involvement GEON was valued at over $320 million with the Bank of Scotland International (BOSI) lending the private equity fund over $250 million to finance the deal. The strategy was to launch GEON on the stock market, a plan that disappeared in the global financial crisis.
On its website GEON claims it once had revenues over $200 million.
BOSI sold the loan as part of a $350 million portfolio to KKR and Allegro last year – the GEON component identified at a rock bottom price of around $5 million. As part of the deal they became GEON’s primary lenders owed $80 million that was due to be repaid in 2015. That will now be written off the books as the new owners look to rescue what they can from the loss-making business.
Currently GEON has 1,200 employees in Australia and New Zealand. It faces massive restructuring as its new owners try to extract what value they can from the company’s numerous printing and mailing sites on both sides of the Tasman.
Allegro directors, Chester Moynihan and Adrian Loader, are based in Sydney and represent Australian superannuation funds among other forms of finance. They claim to manage over $300 million in investments.
New York based KKR Capstone's special situations group has invested in distressed debt in Australia in companies' such as Nine Entertainment and Centro Property Group.
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