Salmat made the takeover offer for HPAL at $2.725 per share, valuing the target at $318m. Not surprisingly the bid was unanimously backed by the HPA board, which had been evaluating offers from a number of parties including private equity.
The merger of Salmat and HPAL will create a $865 million leader in the business communications market. The new combined entity will have a virtual monopoly of the transactional printing business in Australia, but the ACCC said costs to entry for new players were low enough for it to allow the deal to go ahead.
The merger of the two companies will capitalise on their complementary services, said Salmat joint managing director Peter Mattick. Salmat was always favourite to land the deal, precipitated when HPA's 51 per cent owner Kodak insisted on inviting tenders for the business, but it had to wait for the ACCC's green light.
Salmat has a three pronged business, specialising in delivering catalogue distribution, transactional mail-outs and telephone contacts between clients and customers.
HPA, whose major shareholder was Kodak (Australasia), provides information management services to clients in the telecommunications, utilities, financial services and government sectors.
Mattick says, "The transaction is an opportunity to create the leading business one-to-one communication force in Australia and benefits both sets of employees, customers and shareholders. We feel this is an exciting opportunity to capitalise on the strong and complementary services that each business brings to the combined group."
HPA shareholders can exchange their shares for cash or Salmat shares, the number of which is still to be determined.
HPA said it had received a lot of interest from various parties, including private equity firms, since it announce a strategic review in April. Its chairman Edward Hoppe says, "After a thorough evaluation the board believes that it has negotiated an offer from Salmat that represents attractive value for our shareholders."
The directors unanimously recommended acceptance of the offer, in the absence of a higher bid and subject to an independent expert report.
Phil Salter, joint managing director of Salmat, said the company was looking forward to completing the deal, admitting the board would have its hands full integrating Salmat and HPA over the next two years.
He said, "The strategic and cultural fit between HPA and Salmat is excellent and we look forward to completing the sale process as quickly as possible for the benefit of all shareholders, employees, customers and suppliers. Salmat's revenue streams will be strengthened through the addition of HPA's products, services and blue chip customers.
"From an operational view we have identified significant cost synergy and capital efficiencies which will enhance the profitability of the combined group."
Salmat said it expected the purchase to be earnings accretive in the first full year of ownership in fiscal 2009.
HPA shareholders confirm the deal with a vote on the scheme of arrangement at a meeting in October.