By Wayne Robinson | July 16, 2021
Ovato shareholders voted overwhelmingly in favor of plans to sell the retail distribution business to Are Media and a new short-term loan of $ 2.5 million from Are.
Are Media is the largest magazine publisher in Australia and New Zealand, and a major shareholder in Ovato. The retail distribution company was formerly known as Gordon & Gotch, it distributes some 2,700 magazines in Australia and 1,800 in New Zealand.
The AGE was held online and chaired by Ovato President Michael Hannan. He saw 99.75 percent of shareholders support the motion to sell Retail Distribution and take out the new loan.
The Distribution business will now be sold to Are Media in two installments, with Are paying $ 10 million for the Australian business and taking on $ 22.5 million of the debt. Are will also pay $ 5 million for the New Zealand company and incur debt of $ 4.5 million. The deal with Australia is expected to close on July 31, with the New Zealand sale slated for August 30 or soon after. The separation should take into account the different regulatory approval timelines in the two countries.
The number of magazines distributed by the company in Australia and New Zealand has declined by a third over the past four years, from 226 million in 2018 to 150 million last year, with the past two years both having recorded a decrease of 15%.
About 40 percent of the company’s revenue comes from Are Media titles. Overall revenue has grown from $ 72 million in 2018 to around $ 60 million this year. EBIT, however, grew by 50% over the same period, from $ 4.3 million to $ 7 million.
The deal, and the $ 9 million sale of Ovato’s marketing services business to a new Hannan entity, leaves Ovato fully focused on printing.
For Are Media, it will create a vertically integrated company: it owns its publishing business, it owns 16.38% of Ovato, while its parent company Mercury Capital owns most of the Webstar heatset printer in New Zealand. , and it will own the retail distribution business in both countries, giving it the property to publish, print and distribute in both countries.
Are Media Holdco’s new $ 2.5 million interest-free loan to Ovato is in addition to the same entity’s existing $ 2.3 million loan. It will be used to make priority payments to employees, to increase working capital, to repay debt and to help with restructuring.
The loan will be repayable at the end of the agreement with Are Media for the General Public Distribution activity, or 10 days afterwards if applicable, or 6 months after the date of the loan.