PMP has doubled the size of its directory printing capabilities with the $16m acquisition of McPherson’s Enterprises, the directory printing arm of McPherson’s Limited. The sale will generate an after-tax profit of $6m for McPherson’s. Australia’s main directories contract, to produce Telstra’s White and Yellow Pages, is currently split 50-50 between the two companies. The acquisition will hand sole ownership of the contract to PMP until June 2009, and will provide it with the capacity to produce over 30 million of the directories per year.
PMP intents to maintain the McPherson’s Enterprises site in Chullora, NSW, and will run it in conjunction with its own operation in Victoria. Running both sites, according to PMP, will also enable it to improve its scheduling capability.
According to Craig Amos, PMP Print director of operations, the acquisition is a strategic purchase that positions PMP for a long-term partnership with Sensis and a stronger role in Asia Pacific directories.
“Both PMP and Sensis will benefit from the economies of scale created by allowing the contract to be managed by one entity. Sensis is very supportive of the transaction. We expect a smooth transition to a new contract in 2009,” says Amos.
David Kirk, PMP CEO, says, “The acquisition will allow for better service and value to the major client, which is Sensis. The business has a stable, predictable earnings stream and we bought it at what we consider to be a fair price. It’s a business we know well, and therefore we expect the integration to go smoothly. We also believe there are opportunities to improve the business.
“We expect volumes and revenues to be flat until the end of the contract, but we believe there will be productivity gains in manufacturing and most particularly in the supply chain area that will allow us to improve the earnings of the merged business over time.”
David Allman, McPherson’s managing director, says McPherson’s Enterprises had contributed consistently strong earnings and cash flow in recent years, but that the company had received an offer it couldn’t refuse for the business, and it was undoubtedly in the shareholders’ best interests to accept. He also says that uncertainty over the future profitability of the business when the contract expires in 2009 was also a consideration.
