Private equity firm circles Geon
Private equity firm Kohlberg Kravis Roberts is attempting a US-style bankruptcy on Melbourne-based commercial printing company Geon Group.
Along with its Australian partners, Allegro Funds, KKR offered to buy parts of Geon Group from receivers on the same day it appointed receivers, which it was entitled to do as the major creditor.
Meanwhile hundreds of staff at the company’s printing plants in Melbourne and New Zealand have been told the company would keep operating as normal. Geon prints catalogues and brochures, and coordinates mail campaigns and creative work.
KKR and Allegro purchased Geon from Gresham on February 8 for an undisclosed ‘‘small’’ sum. Last year KKR and Allegro became major creditors when they purchased a portfolio of distressed debt from Lloyds International, which included an $80 million loan to Gresham dating back to 2007.
On Wednesday, Geon Group’s directors, Sandy Maier and Jack Crumlin, appointed PPB Advisory voluntary administrators and KKR appointed McGrathNicol receivers. KKR also submitted an offer to buy some or all of Geon Group from McGrathNicol. The receivership process gives KKR and Allegro the chance to cherry-pick the best assets.
In a memo to staff Geon’s chief executive, Graham Morgan, described the manoeuvring as a ‘‘complex’’ but necessary step.
‘‘As long-term believers in this business, [KKR] has informed me that if their offer is acceptable to McGrathNicol that they will commit substantial resources to make Geon successful, including the availability of additional capital and significant senior operational and financial resources,’’ he said.
‘‘KKR have told me that they believe Geon has a strong good management team and that the current situation is largely a function of the capital structure that was put on the business in 2007, rather than execution.’’
Placing the company into voluntary administration temporarily freezes all debts and legal action. Receivers McGrathNicol have taken control of the company’s assets and said it was liaising with employees, unions, customers and suppliers to ensure minimal disruption to operations.
According to government registries Geon also owes money to Fujifilm, Visy and paper company K.W Doggett. These creditors may have to wait until the receivership process finishes and Geon returns to the voluntary administrators before they can recover their money.
Geon was valued at $320 million when it formed in 2007 after Gresham-owned Pacific Print Group bought listed company Promentum.
Gresham borrowed $270 million to pay for the deal from the Bank of Scotland International, now part of Lloyds International. However, structural changes in the printing industry saw Geon's earnings drop to less than $10 million a year, down from combined earnings at the time of the merger of about $60 million.
According to Geon’s website it currently employs more than 1,000 staff and with annual revenue over $200 million.