"This transaction accelerates the Trans-Tasman growth strategy that the group has been pursuing and creates the largest sheet-fed printing services group in Australia and New Zealand," says PPG group CEO, Gordon Towell.
"Following completion of the transaction, we look forward to working with Promentum’s management and employees towards successfully combining its operations with PPG to the benefit of all stakeholders."
The deal will result in something of a windfall for Promentum shareholders, with PPG agreeing to pay $2.25 per share for the company, representing a premium of 74 per cent over the average weighted share price before Promentum’s announcement last month that it had received conditional offers. Worth only $1.25 in November, Promentum shares have continued to climb since the offer and reached $2.17 yesterday.
In a statement, PPG says that it and Promentum are a good fit, with complimentary customer segments, spread of operations and corporate structure. Promentum employs around 700 staff in Australia.
"It will also provide improved operational capability as well as a broader service offering for customers," the statement continues.
There is provision in the agreement for PPG to be paid a break fee of $1.2m under certain circumstances such as the failure of a Promentum board member to back the bid. However, Promentum directors have indicated their intention to vote in favour of the offer, in the absence of a higher offer, and subject to an independent expert’s report.
During February/March, Promentum shareholders will receive a booklet detailing the offer, together with an independent expert report. If successful, the transaction will see Promentum becoming a wholly-owned subsidiary of PPG.
Pacific Print has been in existence for around five years and is New Zealand’s biggest exclusively sheetfed commercial printer and its second largest printing group, employing more than 700 staff with an annual turnover of over NZ$170m (A$149.8m).
ASX-listed web offset printer and services company, PMP Ltd, Promentum’s biggest shareholder with a 24.9 per cent stake, is expected to make a $31m profit on the transaction. PMP finance director, Richard Allely, has been quoted as saying that PMP would be voting in favour of the transaction. PMP had earlier sold its sheetfed printing business to Promentum in 2003, in return for the 24.9 per cent stake.
The industry is speculating on the identity of the underbidder for the company, but chairman of Promentum, Ian Elliot, is tightlipped on the subject. He has, however, expressed satisfaction with the outcome for Promentum shareholders.
"It is a very good result for shareholders and it was the right thing to accept the bid," says Elliott. "We managed to jockey ourselves into a unique position where we had the ability to buy one of our competitors and also more than one private equity firm was bidding for us simultaneously, and that increased competitive tension."
Privately-owned McMillan Printing is understood in turn to have been a possible takeover target of Promentum during its negotiations with PPG, though no outcome has yet been announced.