Pacific Print Group in $203 million Aussie deal

New Zealand-based Pacific Print Group is 50 per cent Australian-owned as of today [Thursday Dec 1], by virtue of a private equity investment from Sydney's Gresham Private Equity Limited.

Gresham's stake in the company involves a $203 million 'transaction' that will facilitate additional acquisitions. The exact price for the 50 per cent equity was not disclosed. Debt facilities are provided by a syndicate comprising ANZ National Bank and Westpac.

In order to expedite the buy-in, Pacific Print Group Limited had to be re-organised into Pacific Print Group Holdings in a friendly take-over by existing shareholders since PPG's Capital Notes are traded on the New Zealand Stock Exchange. PPGH was to have floated on the NZSX in September but these plans were put on hold in favour of private equity (search Print21 online archive 'Pacific Print').

In announcing the deal, PPGH Chairman Sandy Maier said the group had decided that market conditions at present were not right for an IPO, and it had "gone back to Plan A." He said an IPO remained "a long-term possibility." Maier said the Gresham investment would significantly boost Pacific Print's growth strategy in Australia.

"Over the past three years, we've adopted a successful growth strategy in both New Zealand and Australia. The board has now decided that further growth is most likely to come from across the Tasman, and will best be achieved by raising private equity."

The combined annual turnover of PPGH is now more than $160 million, and total staff in excess of 700. This makes the firm the largest sheetfed-only printer in the ANZ region, next to Promentum who reported 2004-05 sales of $139 million; and the second largest overall printer in New Zealand, next to Blue Star which has massive web capacity.

PPGH in Australia comprises Sydney's Graphic World and (as of today) Agency Printing and Melbourne's Graphic Printworks – all B1 highly automated operations. When asked to confirm todayÕs settlement of its acquisition, Agency's Don Elliott stated; "It's imminent; yes it will happen this week but right now I'm bedding in a brand new eight-colour Heidelberg Speedmaster 102 with every option imaginable. It's got the lot on it – we are really busy in the lead-up to Christmas."

Gresham PE's managing director Roy McKelvie was more forthright, "Yes, Agency Printing is included in the deal." He added, "There are a couple of other target acquisitions we are looking at this side of the Tasman; we are working closely with the Pacific Print team on this. Expansion opportunities in Australia look particularly good right now."

In New Zealand, Brebner Printing, Brigden & Giles, Business Printing Group, Printco Graphics, Elite Colour Print, Bays Press, Bryce Francis Graphics and Albion, King & McLay comprise PPGH's sheetfed holdings.

As reported here in September, one of the previous take-over targets was Melbourne's Vega Press but the contract lapsed when the IPO did not take place. Speculation continues as to whether talks will resume.

Geoff Wilding founded PPG three years ago, and has driven the Group's acquisition programme. He will continue to target and facilitate acquisitions for the company as his primary focus. Late last year the company successfully raised NZ$35 million through a public capital notes issue to fund further expansion opportunities in Australia.

Who is Gresham Private Equity?

Gresham is a highly respected investment house, most noted for its role in Australia's biggest corporate transaction in history – the merger of BHP and Billeton plc. Founded by James Graham in 1985 and jointly-owned by Perth-based Wesfarmers – the $8.19 billion diversified industrial group that includes Bunnings hardware chain, coal mines, insurance, chemical and rail enterprises, Gresham continues to have strong ties with Wesfarmers since its managing director James Graham is also a director of Wesfarmers. Chairman of the holding company is Michael Chaney – the business genius credited with taking a WA farming co-operative and changing it into what it is today. Two Wesfarmers directors act as non-executive directors of Gresham Private Equity.

As a multi-disciplined investment house with impeccable connections, Gresham is divisionalised. The division responsible for the PPGH 50 per cent stake is known as 'Gresham Private Equity Fund #2' and includes Australian Pacific Paper Products (makers of 'Baby Love' nappies) and New Zealand retailer Noel Leeming. Two GPEF#2 directors will sit as non-executive directors of PPGH – Roy McKelvie and Guy Reypert.

Roy McKelvie told Print21 online; "We believe the Group has an outstanding management team and is very well positioned with excellent growth prospects in both the Australia and New Zealand markets. The changing dynamics of the printing industry have provided a clear opportunity for consolidation and we believe a leading market participant such as Pacific Print is very well placed to drive and capitalise on the process."

McKelvie has some printing industry background having worked with Irish packaging giant Smurfitt 15 years ago, but is coy about his experience. "Certainly I have been exposed to the industry but I'm not an expert – we have a top team at PPGH with whom I will be working."

Asked if the Wesfarmers pedigree would facilitate PPGH's gaining of print business with the business giant, McKelvie said; "We will have to compete for their business like everybody else; there's no guarantee but of course we will have to look into their print requirements, as a major listed Australian company."

MY CALL
We've tracked PPG's progress since the first "Kiwis are coming!" article back in October 2004. Now, in trans-Tasman co-operation unprecedented 'twixt the Bledisloe Cup nations, it's fifty-fifty. Not that ownership matters; PPGH lets its component companies get on with running their own businesses and Gresham is a player in the international Great Game. The group's seven print companies in New Zealand and three in Australia will soon be on the rise – all in Australia (sorry folks; I can't let on who they will be). PPGH has bought quality – grass-roots printing companies in the industry's 'sweet-spot' – B1 automated sheetfed. In this area, you don't get hammered by mega-run catalogue and magazine publishers who squeeze prices down to wafer-thin margins; and the economies of scale are much more attractive than the A3 and even B2 sector. In short, you can still make a quid. Lots of them.

With the business brains of Gresham on call, plus PPGH's existing savvy and Geoff Wilding's entrepreneurial drive, we are witnessing the formation of a formidable graphic enterprise that is well-managed, financially stable and with the flexibility of SME operations blending within a large corporate group structure.

It's a bloody winner, mate.

ENDS