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PIAA backs PMP/IPMG merger

Wednesday, 01 February 2017
By Graham Osborne

Printing Industries has thrown its support behind the proposed merger of PMP and IPMG that has been delayed as the Australian Competition and Consumer Commission (ACCC) takes a closer look at the potential impacts of the deal.

In a submission to the corporate regulator, Printing Industries CEO Andrew Macaulay argues the ACCC will be obstructing innovation and market adaptation if it blocks the merger.

“The ACCC must not stand in the way of the proposed IPMG and PMP merger,” says Macaulay. “The ACCC should leave the industry to make the market more competitive, particularly internationally; to encourage investment and innovation and to create jobs.’’

'The ACCC must not stand in the way': Andrew Macaulay, CEO PIAA

‘’ACCC blockage would lock the market in its present state – lacking in efficiency, with excess capacity and obsolete equipment.  In so doing, the ACCC would be consigning the market and the industry to the past.”

In its Statement of Issues, the ACCC has voiced concern that the merger might reduce competition in the heatset web offset market.

Printing Industries says that the merger will be good for competition; will promote significant capital investment; promote innovation; and assist in bringing print jobs back from overseas.

Macaulay argues that customer power is one of the reasons why the merger will not lessen competition in the heatset web offset catalogue and magazine market.

‘’Particularly in the catalogue market, customers are dominated by chain stores, such as supermarkets and merchandise stores. These customers hold the whip-hand. They are strong negotiators who decide how, when and where the print product will be supplied. These customers will not hesitate to use overseas print companies or indeed finance expansion or new entrants into the marketplace to get the best price possible for the products they want.’’

Macaulay says that the merger must happen now, while the barriers of entry to and/or expansion in the market could ‘hardly be lower.’

‘’Interest rates are low; finance is accessible; new & second-hand heatset web offset equipment available; and exchange rates are in favour of those who want to upgrade technology or equipment,’’ he says.

Printing Industries president Kieran May says members of the national association are generally in favour of the merger.

“The association consulted widely with our members and they generally support the merger,” says May. “The feedback goes along the lines that the industry needs consolidation and, notwithstanding some trepidation, many members believe that new opportunities will emerge.”

Submissions to the ACCC on the proposed merger closed yesterday.

Here’s a summary of the PIAA’s submission:

Arguments in favour of the proposed merger

The merger of IPMG and PMP (‘the Merger’) must not be blocked.

The Merger:
•           Is good for competition.
•           Will promote significant capital investment.
•           Will promote innovation.
•           Will assist in bringing print jobs back from overseas.

In seeking the Merger, IPMG and PMP are being proactive in tackling the excess capacity and obsolete or duplicated equipment in the market.

This excess is a direct result of ongoing decisions made by print customers to reduce the quantities of print they order.  In other words, it is a result of decisions made by others and therefore outside the ‘control’ of individual print businesses.

The Merger will allow the merged entity to consolidate operations and invest in modern and efficient equipment and consequently to compete on an equal footing with other major market participants, including the IVE Group.

The consequent investment in state-of-the-art equipment across the industry will force a reduction in the costs of production, thereby making the Australian industry competitive with overseas producers.

Due to customer power, the Merger will not lessen competition

The merged entity, together with the IVE Group, existing and new market entrants, as well as overseas printers, will compete in the market.

Magazine publisher customers are governed by their advertising revenue and magazine sales, which then influence the quantity of magazines ordered and the number of pages they are to contain.

The significant catalogue customers of high-volume heatset web offset printing are limited and large.  They include and are dominated by large chain stores, including supermarkets and merchandise stores.

These customers hold the whip-hand. They are extremely strong negotiators who decide how, when and where the print product will be supplied.

These customers will not hesitate to use overseas print companies or indeed finance expansion or new entrants into the marketplace to get the best price possible for the products they want.

The Merger will not materially affect price or service levels, because of the market-power wielded by these customers.

To maximise flow-on benefits, the time for the Merger is now

The Merger must happen now, to accelerate the flow-on benefits of improving viability and shareholder-return; reducing excess capacity; increasing investment by replacing obsolete or duplicated equipment; and the entry of new operators into the market.

The barriers of entry to and/or expansion in the market could hardly be lower than they are right now because:
•           Interest rates are low
•           In general, finance is easily obtainable
•           Second-hand heatset web offset equipment is easily available and affordable
•           Exchange rates set an environment favourable for market participants who want to move to new technology and purchase new machinery and/or second-hand machinery (all of which is produced overseas).

The ACCC is due to announce its decision on 23 February 2017.

 

 

 

18 Responses to “PIAA backs PMP/IPMG merger”

  1. February 01, 2017 at 12:20 pm,

    Inky McFee
    said:

    I think the note regarding 2nd hand machinery misses one point – the sort of volume you need to produce per hour these days to be viable is significant – hence the investment in 64 and 80pp webs. A 16pp web can’t do the volume to cover the overhead in a catalogue only environment at market pricing where paper represents over 70% of the job cost.

  2. February 02, 2017 at 1:52 pm,

    Print Newbie?
    said:

    Why is an industry body passing comment on a merger that would only benefit the two parties involved?

    IPMG/PMP would be 70% of Web capacity in this country and there would only effectively be one competitor. How does this promote competition? (Alternate facts being used?)

    The PIAA should keep it’s mouth shut if it isn’t going to tell the truth.

  3. February 03, 2017 at 9:12 am,

    Print Oldie
    said:

    Print Newbie – the PIAA is not just ‘passing comment.’ It is stating a policy position on a matter of major importance to the Australian industry. It’s taking a stand and any organization/govt./association/union that does not stand for something, stands for nothing. I can see nothing ‘untruthful’ in the story. Unsavoury to some maybe, but this country can no longer sustain two such major heatset web printers with massive capacity in a declining market. Hypothetically, if GM, Ford and Toyota had merged car production, we’d still have a car manufacturing industry. PMP-IPMG merged makes complete sense.

  4. February 03, 2017 at 11:11 am,

    Print Newbie?
    said:

    Print Oldie, they stated a policy position which does not make sense for the “Australian Industry”.

    Nowhere have they advocated for all the printers to join up together as one company before so they can survive. Where is this “Policy Position” on their website? It’s BS mate.

    Your analogy was ridiculous.

    They are supposed to be advocating for the Print Industry in general and by advocating for there to be less competition – reducing company numbers is what their article was about – seems a bit daft.

    How does PMP and IPMG joining up together help another Printing Company get a more competitive print quote for a Heatset Web product for their customer. How does having less suppliers to send quotes to help? How does having fewer suppliers help anyone except the self serving monopoly that is created?

    Where on the PIAA website is this stated as a solid grounded policy position? FFS.

  5. February 03, 2017 at 12:55 pm,

    Print Newbie?
    said:

    This article voiced by the CEO of PIAA (Someone who hasn’t worked at a printing company before mind you.) – You can look him up on LinkedIn

    His statement: ‘’Particularly in the catalogue market, customers are dominated by chain stores, such as supermarkets and merchandise stores. These customers hold the whip-hand. They are strong negotiators who decide how, when and where the print product will be supplied. These customers will not hesitate to use overseas print companies or indeed finance expansion or new entrants into the marketplace to get the best price possible for the products they want.’’

    – is borderline ignorant. These customers would have gone overseas years ago if it wasn’t for the intense week by week market they change prices in. (Not enough time to go overseas) Woolies, Coles, and Aldi would never risk trying to hold their pricing for 3 months.

    This man, our CEO of the PIAA, has spent most of his working life in the very noble Poker Machine making industry and specialises in lobbying governments foreign and domestic. This is exactly what he is doing now, just not for the benefit of our industry here or our customers here.

    If the Hannan Family is tired of running print shops via their property rental operation they should sell them off one by one. (I doubt they are tired of this though.)

    I hope the ACCC rejects the bid. PMP has progressively sold off all of it’s property assets over the years. (Who in their right mind does this in Sydney for instance when you have plant on the very property that is sold?)

  6. February 03, 2017 at 1:47 pm,

    Inky McFee
    said:

    Print Newbie, you make a passionate point about PIAA, but I agree in principal with Print Oldie. Their job is to support the print industry – not retailers or publishers.You do however you do show a complete lack of understanding regarding the heatset market. If you think the market will suffer a lack of competitiveness, you can always go and buy a heatset machine and relevant finishing equipment and set yourself up as a competitor. Or you can take a cold hard look at the facts and realise the sorts of margins the current providers live on would require very deep pockets and patient bankers. In regards to your post, i’ll answer honestly the points you raise above:

    1. You’re right, retailers and publishers would run off to China in a heartbeat if timelines weren’t a factor. They have screwed pricing down so far that the market needs consolidation in order to enable future investment. Heatset Web offset pricing is probably 40% cheaper than it was 15 years ago due to progress in technology of presses and finishing. If there is no returns, there is no reinvestment.

    2. The background of the new CEO is probably of benefit to our industry. For years we had no voice in Canberra. Prior to the Tony Abbott election, we were told how great PIAA’s relationship was with the incoming Liberal Party and it would be good times for us all – yet as soon as they were in, government print spending was slashed, and Australia Post allowed to ride roughshod over mailing prices. I’m tired of making new friends in Canberra – lets use our base to get a real voice in the capital. If that means hiring someone who knows how to operate in that environment, so be it. I know the CEO’s of PMP, IPMG and IVE (Bluestar) couldn’t operate a press or binding line – doesn’t mean they aren’t effective CEO’s.
    3. The Hannan’s are not a charity. If they want to sell, they should be able to sell to whomever they see fit. You should also realise the value in IPMG is as a group, not a few print shops and retouching companies.
    4. PMP is a printing business, not a property business. As a public company they have a responsibility (a fiduciary one) to make best use of capital for their shareholders. If that means selling land to finance ongoing business, then thats a perfectly reasonable thing to do. They sold to a major property investment group with long lease backs – not an unusual arrangement for any manufacturing business.

  7. February 03, 2017 at 2:22 pm,

    Print Newbie?
    said:

    I love the timing of these statements from Andrew Macaulay, Kieran, and Mary Jo. After the last day of official further submissions to the ACCC on the matter.

    This is very disappointing.

  8. February 03, 2017 at 3:10 pm,

    Print Newbie?
    said:

    Inky McPhee,

    “1. You’re right, retailers and publishers would run off to China in a heartbeat if timelines weren’t a factor. They have screwed pricing down so far that the market needs consolidation in order to enable future investment. Heatset Web offset pricing is probably 40% cheaper than it was 15 years ago due to progress in technology of presses and finishing. If there is no returns, there is no reinvestment.”

    So it’s agreed that Andrew Macauley’s point on this subject was totally wrong and it was the first point he mentioned in the article?

    “2. The background of the new CEO is probably of benefit to our industry. For years we had no voice in Canberra. Prior to the Tony Abbott election, we were told how great PIAA’s relationship was with the incoming Liberal Party and it would be good times for us all – yet as soon as they were in, government print spending was slashed, and Australia Post allowed to ride roughshod over mailing prices. I’m tired of making new friends in Canberra – lets use our base to get a real voice in the capital. If that means hiring someone who knows how to operate in that environment, so be it. I know the CEO’s of PMP, IPMG and IVE (Bluestar) couldn’t operate a press or binding line – doesn’t mean they aren’t effective CEO’s.”

    And one of Andrew Macauley’s first hires was Mary Jo Fisher to be our representative in Canberra. A person who went through a major illness while a Senator and had to quit amongst shoplifting and assault allegations. Before this though she famously put crap on Julia Gillard’s Climate Change policy by doing the Hokey Pokey and the Time Warp on the Senate floor. (Only the Lib/Nats and various feeble parties have been putting crap on the idea that our Climate has been changing, especially due to human activity) I am not convinced Mary Jo is the right person to have wheeling and dealing for us in Canberra especially given the lack of results this past year. (Census printed?)

    “3. The Hannan’s are not a charity. If they want to sell, they should be able to sell to whomever they see fit. You should also realise the value in IPMG is as a group, not a few print shops and retouching companies.”
    They certainly are not a charity but when you become a major business in a small country there are historical and well known problems that occur not in the public interest – they know this and have tried once before and got knocked back. Now they are trying again when the economy is in an even more depressed state than their previous attempt. The ACCC are obliged to do what is in our best interests as a whole, not the Hannan Family. They can sell their best performing assets one by one. Also Inky, you did read the fine print on this proposal didn’t you? They might be selling their majority interests in the operations but are they selling the land they are on as well?

    “4. PMP is a printing business, not a property business. As a public company they have a responsibility (a fiduciary one) to make best use of capital for their shareholders. If that means selling land to finance ongoing business, then thats a perfectly reasonable thing to do. They sold to a major property investment group with long lease backs – not an unusual arrangement for any manufacturing business”

    And we all know what comes next when companies sell out the assets they own, especially property. The middle management that orchestrated the sales during their tenure leave someone else to manage the failing entity. Ask Bob McMillan if it’s wise to sell your commercial property in Sydney. Ask Bluestar bond holders if property assets would have been beneficial? The Hannan’s replaced the property they sold with more. Notice any winners yet?

    This deal is not in our industry’s best interest. I have tremendous respect for the Hannans and acknowledge they were outstanding to work for and deal with – I would be trying to do exactly what they are doing.

    Your comments regarding setting up my own heatset business in this climate are a mite bit nasty given the failures of DP, DP2, Quality, and all the others swallowed up by the IPMG PMP Borg in the last twenty odd years.

  9. February 03, 2017 at 6:29 pm,

    Print Oldie
    said:

    Newbie,
    I hate to be personal, but since you started the abuse: You write much but say little. You are full of criticism and hot air but you have no evidence-backed persuasive argument whatsoever…just empty rhetoric, the odd anecdote and mean spirited inappropriate commentary on individuals. It seems you are just a bitter barroom chatterer with nothing constructive to contribute but the sound of your own voice.

    You also appear to be as thick as 2 short planks.
    If you care to learn and not be blinded by your bigotry:
    1) PMP and IPMG ARE a substantial pert of the “Australian Industry” That they are once more into the tent of the PIAA is a credit to the new CEO who you so deride
    2) What you describe as my ‘BS’ shows the way your brain works – or does not. The PIAA position is a POLICY on the PMP/IPMG merger…not for all the industry to merge as one, you doofus!
    3) The best print business operators I know in the industry came from non-print backgrounds: accountants, IT people, MBAs. As a genre, craft-based printers have shown themselves to be less than proficient business managers. There are exceptions of course. Maybe you’re one, so you would get points for that.
    4) If my analogy is ridiculous, explain why it is so and don’t just fling abuse around.
    5) Where have you been for the last 15 years? Why do you think there are 3,000-off FEWER print businesses in Australia than at the turn of the millennium?? It’s called change-progress of an industry – higher automation, diminishing demand, massive over-capacity and technological attrition.
    6) As for Bob McMillan, I would imagine he would look at the situation in heastest web and approve of the PMP/IPMG merger. After all, he merged his company in with BlueStar; or is that an inconvenient fact for you?

  10. February 03, 2017 at 7:01 pm,

    Inky McFee
    said:

    ok, point form it is.

    1. I think the only way ahead for innovation in the heatset world is through consolidation in the short term. Macauley is correct in that point.
    2. Mary Jo Fisher has been involved with PIAA for years – back in Bill Healey’s time. I’m not a fan of her side of politics, but I’m also aware that at the time she was battling some mental health issues. I wish her the best and look forward to her success with PIAA going forward – which will be all our success.
    3. The Hannan’s are a significant property owner – just as they were before they owned presses, Their property company (Rathdrum) will be a landlord to the new PMP/IPMG company, just as it is run as a separate company now – All of the existing IPMG businesses pay rent to them. The ACCC declined support in 2001 given the (at the time) recent demise of Diamond Press, and it was prior to the startup of Webstar.
    4. McMillian was an owner/operator. The only shareholder he had to please was himself. Locking up capital in property is a poor business decision when you’re a public company which needs to run with significant capital investment. Bob had the luxury of running a print business when it was on the up – my family business enjoyed the same perks. It’s about a return on assets, particularly when a single 80pp Heatset Web is around a $15m investment including inline finishing.
    Lastly, the end comment wasn’t intended to be nasty, it was a simple point that it’s easy to shoot down these things when there is self interest at play – which in your case is the fact that it might be harder for you to make money broking a print job or two.

  11. February 06, 2017 at 4:41 pm,

    Print Newbie?
    said:

    Nowhere on the PIAA website is it a stated position that fewer print businesses is better for competition or is there any explanation of this rather novel (In the business world) idea that less competition is better for the industry.

    Using the car industry was a poor analogy because they are making items they can sell to another person if they don’t sell it to the intended buyer. Their industry was quite different to ours. Why use this comment about the car companies merging being a good thing but it would only be good for the print industry if PMP and IPMG merged (You call me a doofus but you used this analogy for one industry to combine all it’s players but you meant only for the heatset market?)

    I would argue the massive over capacity exists only on machinery that was paid off years ago.

    How do you get more innovation from a part of an industry that has less players. Seriously, how does this happen? I would have thought competition drives innovation. (I swear I have heard that somewhere.)

    PMP and IPMG both made money last year. How has over capacity hurt them? Did PMP make money only on the sale of assets? Why do they need to merge? Can’t they make a go of it themselves? They can’t innovate without merging with IPMG? IPMG can’t innovate without merging?

    I am passionate about the industry, especially the heatset web market. Catalogues still work well in Australia – I do not understand the position Macauley has presented. Why wasn’t this a “slam dunk” for the ACCC?

  12. February 07, 2017 at 3:41 pm,

    fairgo
    said:

    Print newbie. Look up the word ‘hypothetically’ for cryin’ out loud.
    What drives innovation is having the money, desire and creativity to innovate
    Apple Microsoft Xerox Adobe etc all changed the world by pure applied science innovation not because of competition.

  13. February 08, 2017 at 12:38 pm,

    Comrade Dave
    said:

    Hey Fairgo,
    understand your point and agree with the money etc. but I think you underestimate the power of competition. For me my competitors play a big part in making my business perform better and also for me to find better solutions on how I work with my clients and keep my clients. – its that word again innovate.

    Otherwise I would put my feet up and take it easy. – may even jack my prices up.
    Now that would be good.

  14. February 08, 2017 at 1:11 pm,

    Fairgo
    said:

    G’day Comrade Dave, yes I agree competitors play a part mate; we always strive to be better than ‘the rest’. What I meant was competition alone does not drive innovation. Hyper-competition such as we have seen in our industry can become a race to the bottom. Maybe only for those not as smart as you, but it does happen! Sheer survival takes over from innovative practices.

  15. February 08, 2017 at 3:38 pm,

    Comrade Dave
    said:

    I agree hyper-competition is not good.

  16. February 09, 2017 at 10:44 am,

    Print Newbie?
    said:

    Hyper Competition in the Australian Heatset Web Market?

    I have heard it all now.

  17. February 09, 2017 at 1:59 pm,

    Inky McFee
    said:

    When contract catalogue work is being sold at under $1300 a tonne including stock, thats a fair sign of hyper competition. Its also unsustainable. That’s why there will only ever be one sheetfed printer the size of Bluestar. Geon just got the plug pulled first.

  18. February 09, 2017 at 10:12 pm,

    Print Newbie?
    said:

    That sounds like predatory pricing, not hyper competition. Why do some catalogues sit at one printer for more than 10 years? Is that the same company that has been shedding it’s real estate assets?

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