Gresham Private Equity has exited its ill-fated foray into print, with US investment firm KKR and turnaround investment firm Allegro Funds Management taking full control of Geon, leaving Gresham hundreds of millions of dollars out of pocket.
Gresham initially invested around $270m in Geon and has since poured in cash. Geon had an estimated valuation of more than $320m with almost $60m in earnings in 2007, but the dramatic decline in the printing industry saw earnings cut to less than $10m a year.
KKR and Allegro are believed to have paid a nominal sum to Gresham for Geon, which owes KKR an $80m loan, a loan that is now expected to be dissolved. Geon will now be restructured under KKR’s and Allegro’s special situations group.
KKR won a reputation as the US junk bond kings during the 1980s. Allegro is a turnaround specialist. Geon is still Australia’s biggest sheetfed printing group, with some 1200 staff employed nationwide.
KKR became involved with Geon when it bought $350m worth of loans from the Bank of Scotland International last year, which included the $80m loan to Geon. According to the Australian Financial Review KKR paid around $5m for the Geon loan.
According to the AFR the present alternatives for Gresham were to allow Geon to go into receivership or let KKR take over.
Gresham’s exit marks the end of tumultuous ride for the two big private equity funds, with Champ going through a similarly disastrous journey into print when it jumped into the print industry at the same time as Gresham. Both had the idea of consolidating print businesses into super-printers and floating on the stock market, but making money from print turned out to be far from easy, especially when the global financial crisis stymied their plans for IPO. Champ has also just exited print, selling Blue Star to Geoff Selig in Australia and Tom Sturgess in New Zealand.
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