Australia’s biggest sheetfed printing business is on the brink, with new owners KKR p/e calling in the administrators and receivers to Geon yesterday.
Update 1: The receivers are now assessing the business with the intent of selling it off, possibly breaking it up into separate units.
Update 2: Incredibly the first offer has apparently come from KKRM, which is a vehicle owned by current Geon owner KKR and its turnaround partner Allegro. Quite why KKR would put Geon into receivership then bid for it is as yet unclear, industry awash with speculation about the upshot, which may be slimmed down Geon with no debt. KKR is no stranger to controversial financial engineering.
Update 3: Geon suppliers unlikely to see zip of any monies owed to them, supplies include dozens of smaller print companies.
Update 4: Paper costs likely to rise for all as merchants' insurers take monster hit on Geon stock.
The dramatic events at Geon come less than two weeks after KKR – known as the junk bond kings of Wall Street - together with its turnaround partner Allegro took full ownership of the company.
PPB Advisory are the administrators, but it is receivers McGrath Nicol who will decide the future of the company, which employs some 1200 staff and has print sites in Sydney, Brisbane, Melbourne, Perth and Auckland.
Given KKR’s creative financial nous the reason that it put the business in receivership less than two weeks after acquiring it, and what it hopes to gain from it, is unclear, but it is almost certain to be a deliberate move to maximise its own gain.
Australian Printer understands that KKR paid less than $5m to former owner Gresham for the business. KKR also owns an $80m Geon loan.
Geon has major lines of credit with paper merchants who will be feeling a tad nervous today. It is also Heidelberg’s biggest customer, with a raft of long B1 perfectors.
Gresham famously paid around $300m for Pacific Print Partners and Promentum in 2005-7, forming Geon from them. The strategy was to buy various print businesses, consolidate them, float on the market and make a heap of cash.
However the GFC put the kybosh on that particular get-rich-quick scheme, leaving the owners with the task of making money from print, rather than financial engineering, which proved an altogether more tricky prospect.
Geon has had a turbulent year in terms of senior management, with a host of senior staff leaving, including Scott Thompson, chief operating officer; Roger Kirwan, head of operations; Glen Draper, eastern seaboard general manager; and Kim Lykass, NSW head of sales. It has also waved goodbye to New Zealand CEO Andrrew Durrans.
If Geon does fall over it will have a mixed reception in the print industry, on the one hand the nation’s independent sheetfed printers will be looking at around $300m worth of work that will come back onto the market, on the other they may find it harder to get finance for new kit as bankers will be even more reluctant to lend than they already are.
Australian Printer is seeking comment from the parties: keep posted on the i-grafix website for updates.
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