OVATO IN ADMIN - DEADLINE DAY FOR EOI

Today is the day would-be bidders for all or part of the fallen Ovato business have to have their expressions of interest in with the administrator.

Serious bidders will then be invited to sign a confidentiality agreement and enter the data room for Ovato, where they will get a closer look at the business.

Binding offers are due in two weeks’ time, Thursday 11 August. The administrator FTI is aiming to sell the business in one lot, but is also open to offers for parts of the stricken company. 

Potential buyers for Ovato include rival IVE, as well as part-owner and biggest customer, magazine publisher Are Media's owner Mercury Capital, which also majority owns Blue Star Group in New Zealand. Recent investor, the cash-rich Opus Group owner Hong Kong based Left Field Print Group, cannot be discounted. In addition there will be plenty of private equity funds looking at a business that has long term contracts, and for which they will be able to shed the “legacy cost issues”, code for the existing employment contracts that Ovato cited as one of the primary reasons it became unsustainable.

In addition the directors could also consider a DOCA, which would entail the creditors agreeing to reduce their claims and agreeing a repayment timeline. However, apart from wiping out much of the debt, a DOCA would not deal with the underlying issues that were cited as reasons for the collapse.

Ovato comprises the super-site at Warwick Farm with its seven heatset webs, as well as heatset plants in Qld and WA, a Brisbane based packaging business, and commercial print operations in Cairns and Auckland.

Its customer list includes the biggest magazine publisher in the country, Are Media, which may also be a bidder, and major retailers who place their catalogue work with Ovato. Catalogues in fact is the biggest part of the business, comprising around 60 per cent of the work, with magazines 25 per cent and packaging seven per cent.

Revenue at Ovato will be revealed shortly in its annual accounts, but for Australia is likely to be around $250m for the year, the first half was $123m. Ovato was a billion dollar a year business when PM and IPMG merged.

Ovato was placed into voluntary administration by the directors last Thursday, following losses that have totalled $430m over the past five years, and despite a restructure 18 months ago that saw $40m injected into the business, a quarter of the 1200 staff made redundant as the company closed its Victorian manufacturing site in Clayton, and suppliers asked to take a 50 per cent cut in outstanding invoices. Since then a large scale sale process has been underway with virtually every part of the company that is not core sold off. In addition the New Zealand heatset business was shut  down. The company said “market volatility, raw materials increases and legacy cost issues” were the contributing factors.

First creditors meeting is due next week.