Matthew Bickford-Smith, chairman of PMP, anticipates major cost reductions following the company's proposed merger with IPMG.
Speaking to shareholders at the annual general meeting, Bickford-Smith said the merger would allow PMP to save $40 million per year, for a one-off $65 million cash outlay, through consolidation and rationalisation programs. "From the shareholders' perspective, in the short-term, the merger will deliver significant synergy benefits by retiring older equipment - in the process, and very importantly, removing some spare capacity out of our businesses," he said.
Bickford-Smith said that over-capacity is a significant problem in the printing industry, and consolidation is the solution. "This year, we are at the point where the current structure of the industry is no longer sustainable. The Board is of the view that consolidation is an important and necessary strategic response to sustain PMP's future," he said.
Peter George, PMP Managing Director and CEO, said that though cost-cutting programs had been successful, the merger is the best way forward for the company. "We have removed all the noise from our operations. Everyone is accountable. Utilisation, waste, scheduling - they are all better than they have ever been, but it doesn't matter if there is fundamental over-capacity in the industry. That is why we have taken decisive action to address and control the inevitable industry consolidation," he said.
The ACCC is carrying out an informal review into the merger, which is similar to a deal the consumer watchdog knocked back in 2001. Submissions closed on Friday November 18, and the preliminary findings are expected to be handed down on December 22. If the deal goes ahead, PMP will acquire 100% of IPMG, then issue new PMP shares to IPMG shareholders, who will collectively own no more than 37 percent of the company.
PMP shareholders will vote on the merger at an extraordinary general meeting on December 16.