Trans-Tasman printing invasion suffers setback – news commentary by Andy McCourt

The contracts of sale PPG had with Melbourne’s Vega Colour Group, Graphic Printworks and Sydney’s Agency Printing were conditional on a public share float (IPO) of the company on the New Zealand stockmarket that did not go ahead as scheduled.

PPG told the New Zealand Stock Exchange that it would seek private equity funding but that the public float was still possible ‘in the longer term.’

Vega Press’ Peter Gude said; “The sale is suspended because it was conditional on the IPO. When that did not happen, the contract became invalid. These deals can go either way, and the spirit between Vega and PPG remains good. The door is still open for a renegotiated acquisition but for now we are very busy and getting on with business.”

Don Elliot of Agency Printing commented; “As far as I am concerned, nothing has changed. I am aware the share float is not proceeding but until I hear otherwise we are in the process of being acquired by PPG. I’ve had three other offers to buy Agency since the PPG announcement but have knocked them back. It’s business as usual, in fact we’re busier than ever and there’s a new Heidelberg Speedmaster 102 eight colour on the water now for installation here as soon as it arrives.”

Paul Keating of Graphic Printworks, Oakleigh, Melbourne said similarly, “Yes, the IPO in New Zealand is on hold and this affects the contract of sale but we are awaiting further news.” Graphic Printworks was formed in 2002 with the amalgamation of JPR Printing and B&M Graphic Print. Turnover is AUD$12 million, it employs 56 staff and is equipped with the latest Fuji CTP and Komori Lithrone presses including a brand new six-colour 40” model.

Back in May PPG announced its intention to make a public offering of shares on the New Zealand Stock Exchange. Wellington-based Fortsyth Barr was appointed as manager ‘should it eventuate.’ According to Forsyth Barr MD Neil Paviour Smith, PPG’s decision to go for private equity again – it returned a bonanza to ANZ private equity when it repaid seed funding – is; “in a market flush with investment funds. There is certainly nothing negative from our perspective, just a question of what's the best solution for Pacific Print to pursue right now.”

PPG posted a year end 112 per cent increase in sales, thanks to the acquisition of Brebner Print, NZ, and Graphic World, Sydney, and 65 per cent increase in pre-tax profit to NZ$4.504 million. It’s earnings per share has jumped 52 per cent in its preliminary FY report, from .372 cents-per-share to .563 cps. Its capital notes which have raised NZ$35 million since December 2004, continue to be traded and note holders have preferential entitlement in any IPO.

PPG’s ceo Geoff Wilding was able only to offer the comment; “I am constrained by our (NZ) securities legislation from commenting on the private equity until a release is made to the market.”

MY CALL:

It’s all about timing and what’s best for shareholders. PPG’s original intentions were to go public in 2006, so the September 2005 possibility may have been a little too soon. Also, it takes time to raise money in the market if the allotment is not fully subscribed, or the preferential note holders do not take up their entire options.

Private equity (see last week’s news commentary), once secured is immediate and we can fully expect an announcement to be made by Geoff Wilding in the near future. PPG’s preliminary 2004-05 results show a turnover of AUD$113 million and once (if) the Vega/Agency/Graphic Printworks deals go through will make it the largest sheet-fed print group in Australasia, eclipsing Promentum’s (Penfold-Buscombe) recently announced turnover of AUD$139 million and probably rising to AUD$175 million.

However, Promentum’s pre-tax return of 7.4 per cent on sales betters PPG’s preliminary result of 3.6 per cent. However, Promentum did have some one-off restructuring benefits resulting from its taking over PMP’s sheetfed operations – and then selling truckloads of older presses at auction.

Whatever happens next, it looks like PPG and Promentum will be head-to-head in Australasia’s sheetfed print communications market as the two leading players, with PMP, IPMG, AIW, Argyle, Franklin and Webstar slugging it out in the web wars.

As WC Fields one put it “It is not concluded until the well-fed female chanteuse bursts forth in melody.”

Actually, he didn’t. I made that up as I am away on a four-week break and feeling quite chipper. See you back here in mid-October.