A blog on issues affecting Australia's newsagents, media and small business generally.

Are Media to acquire Ovato magazine distribution business

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.

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magazine distribution

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  1. Colin

    So, Are Media now has the magazines, the printers and the distribution network. And the incompetent owners of Ovato have accepted inevitable, they are bust with nowhere to go and all commercial financing avenues closed.

    Taking the integrated route makes total sense for Are Media. They can now manage their print, digital and social businesses seamlessly.

    I see no benefit and very high risk for all the publishers. Are Media should be forced to divest the distribution business.

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  2. Mark Fletcher

    Colin, I don’t see any reference to printing specifically in the ASX announcement.

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  3. Joe

    They had a better run and profitable distribution arm under ACP/BAUER prior to 2016. Always knew this would happen…

    What’s old is new apparently

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  4. CC

    Hannan family is moving back to their previous successful business strategy.

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  5. Peter R

    Forgive me if I am wrong but I suspect what is left has been slimmed down dramatically and the costs of doing this has been by borne by others including Australian Taxpayers when it came to paying out employee entitlements and by others who were suckered to buy into the industry/businesses. On the issue of employment entitlements I believe something similar was achieved in Qld by the name of Clive Palmer with his Nickle Assets.

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  6. Steve

    Peter I also suspect this decision has been nicely postponed to maximise subsidised wages via JobKeeper support . Let’s hope for all concerned that Are Media continue to see value in their print publications.

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