Ovato Retail Distribution

Ovato to sell Retail Distribution business to Are Media; focus on core print offering

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Ovato is bringing its core business back to print, entering into binding agreements to divest its Retail Distribution and Marketing Services businesses. 

Ovato told its shareholders earlier this week that it has entered into a binding sale agreement to sell the Ovato Australia and New Zealand Retail Distribution business to Are Media

Ovato Retail Distribution is Australia’s largest independent distributor and wholesaler of magazines and printed media, distributing a range of more than 3,000 mass media and special interest publications across independent newsagents, supermarkets, petrol and convenience stores and travel hubs.

Are Media to acquire Ovato Retail Distribution business

The deal with Are Media would comprise 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 per cent shareholder of Ovato. Shareholder approval will be sought for the transaction to comply with ASX listing rule requirements. 

The Hannan family, Ovato’s major shareholder at a collective 43.4 per cent, has indicated their support for the transaction and intent to vote any shares it holds in favour of the transaction at the mid-July 2021 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 shareholder approval and regulatory approvals, it is expected that the transaction will be complete by the end of July 2021. 

Divestment of Ovato Marketing Services businesses 

In addition, Ballygriffin Holdings, 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, for A$9 million, the entire issued share capital of its marketing services businesses comprising: Ovato Creative Services, Ovato Technology, Ovato Communications and Ovato Creative Services Clayton. 

Shareholder approval will also be sought for this transaction, and Leonergan Edwards & Associates have been engaged to determine if the put option deed is fair and reasonable to Ovato shareholders who are not associated with Ballygriffin. 

Michael Hannan.

Ovato Chairman Michael Hannan said “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.” 

Change in management 

Kevin Slaven has advised the Ovato Board that he will not be seeking an extension to his current contract, which expires in September 2021.

Kevin Slaven.

The Board and Slaven have agreed that he will step down as CEO and Managing Director and remain in the business until the end of June to assist with the business sale and handover. 

James Hannan.

Current Ovato Chief Operating Officer James Hannan has been appointed as the new CEO and Managing Director, effective immediately. 

Hannan has over 18 years’ experience in print operations and has held senior executive responsibilities at Ovato since 2014. He played a pivotal role in Ovato’s recent recapitalisation and business restructure, and is spearheading the company’s non-core asset divestment program. 

Chairman Hannan recognised the role that Slaven played since taking on the CEO role in late 2017, thanking him for his guidance, leadership and loyalty to the company. 

“He has addressed the challenges of completing a very complex merger of two of Australia’s largest print businesses; IPMG with PMP, followed by a significant operational and corporate restructure ro right size the business required by market conditions and the COVID-19 impacts.” 

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