Announced this morning:
Sale of Retail Distribution (Australia and New Zealand) to Are Media Limited
Ovato and Ovato New Zealand Limited have entered into a binding sale agreement to sell the entire issued share capital of each of Ovato Retail Distribution Pty Ltd and Ovato Retail Distribution NZ Limited (together, “Retail Distribution (Australia and New Zealand)”) to Are Media Limited (“Are Media”) (the “Transaction”).
The consideration for the Transaction comprises a headline purchase price of A$15 million in cash and the acceptance of a negative working capital position of approximately A$27 million.
Are Media is a 16.4% shareholder of Ovato and is accordingly a substantial holder in Ovato for the purposes of ASX Listing Rule 10.1. Therefore, shareholder approval will be sought for the Transaction to comply with ASX listing rule requirements. Ovato intends to dispatch a notice of meeting in relation to the Transaction mid-June 2021, with the meeting to be held mid-July 2021.
The major shareholder of Ovato, the Hannan family, who collectively hold 43.4% in Ovato, has indicated its support for the Transaction and intends to vote any shares it holds in favour of the Transaction at the proposed shareholder meeting.
Ovato has engaged an independent expert, Lonergan Edwards & Associates, to determine whether the Transaction is fair and reasonable to Ovato shareholders who are not associated with Are Media.
Subject to the satisfaction or waiver (as applicable) of the conditions to the Transaction (which include customary regulatory approvals), it is currently expected that the Transaction will complete by the end of July 2021.
Put option to sell Marketing Services (Australia) to Ballygriffin Holdings Pty Limited
Ballygriffin Holdings Pty Limited (“Ballygriffin”), an entity owned by the Hannan family, and Ovato have entered into a binding put option deed under which Ovato could require Ballygriffin to acquire the entire issued share capital of Ovato Creative Services Pty Ltd, Ovato Technology Pty Ltd, Ovato Communications Pty Ltd and Ovato Creative Services Clayton Pty Ltd (together, “Marketing Services (Australia)”) for A$9 million.
Ovato Limited – ABN 39 050 148 644
Shareholder approval will also be sought for this transaction to comply with ASX Listing Rule requirements.
Ovato has engaged an independent expert, Lonergan Edwards & Associates, to determine whether the entering into the put option deed is fair and reasonable to Ovato shareholders who are not associated with Ballygriffin.
It is expected that the timing of the shareholder meeting will be similar to the Transaction referred to above.
Change of CEO & Managing Director
Kevin Slaven has advised the Ovato Board that he will not be seeking an extension to his current contract which expires on 17 September 2021. It has been agreed with Kevin that he will step down as CEO & Managing Director and remain in the business until the end of June to assist with the business sales and to ensure an appropriate handover.
James Hannan, currently Chief Operating Officer with over 18 years’ experience in print operations and senior executive responsibilities since 2014, has been appointed as the new CEO & Managing Director effective immediately. James, whilst responsible for the Group’s operations, also played a pivotal role in the successful negotiations with all stakeholders through the recent recapitalisation and restructure of the business and is spearheading the non-core assets divestment program. James will be very ably supported by existing members of the leadership team. The key terms of James’s employment contract are disclosed below.
Michael Hannan, Chairman, says “The challenges of the industry over the last decade were further exacerbated by COVID-19. In response, the business will bring its focus back on print, the core of its operations. It will allow focus to be placed on a strong, viable and profitable printing business in Australia and the ability to invest in new technologies to support print. The sale of the Retail Distribution and Marketing Services businesses will greatly assist in providing Ovato with cash reserves for ongoing transformation and will be the catalyst for a significant flattening of the corporate costs starting from the top with immediate savings being realised by not replacing any departing member of the leadership team.”
Referring to the change of CEO, Michael Hannan says “The Board recognizes the role that Kevin has played in a very difficult period for the company since being asked to take the reins unexpectedly in late 2017. He has addressed the challenges completing a very complex merger of two of Australia’s largest print businesses; IPMG with PMP, followed by a significant operational and corporate restructure to right size the business required by market conditions and the COVID-19 impacts.
The Board wishes to thank Kevin for his guidance and leadership through this difficult period, and for his loyalty and dedication to the company. We wish Kevin well in his future endeavours.”
This announcement was authorised for release by the Board of Directors of Ovato.
I predicted this when Are Media first acquired a stake in Ovato. To me, it made a logical next, step move.