Blue Star on consolidation path

A total of 120,000 people were employed across the pulp and paper manufacturing, printing and support services, and publishing in 2007-2008. By 2011-2012 it had fallen to 106,000. Industry EBITDA dropped by one third to A$4 billion ($3.7 billion) over the same period.

Small players still dominate, with the vast majority of participants employing less than 20 people.

In early 2011, around the time Blue Star Group, one of the market leaders, was exploring the options for restructuring its debt, insolvency firm Ferrier Hodgson estimated that 500 printers had shuttered over the previous six years in the face of weak consumer spending and overcapacity.

Further consolidation was seen as inevitable and Blue Star, now recapitalized and under new ownership, is playing a role in it.

"We held a view that this business was making money, had a good offering to the market but needed a different balance sheet and management team," says Angus Stuart, a director at Wolseley Private Equity. "We also held the view that there would be further consolidation and there was a prize for the player who could lead that."

Wolseley acquired Blue Star from CHAMP Private Equity in November 2012, following a restructuring effort. It partnered with printing industry veterans Geoff and Paul Selig - the former previously served as CEO of Blue Star's Australian operation.

A portfolio of assets was picked up last year from distressed printer Geon and then last week Blue Star agreed a merger with Independent Print Media Group (IPMG).

The combined entity will have revenues of A$700 million, becoming Australia's largest printer. It will have operations all along the eastern seaboard, encompassing printing, distribution, print management and logistics, and creative content, which now ranges from graphic design to augmented reality services.

Stuart contends that Australian customers are not necessarily buying fewer printed products but becoming more specialized in their requirements. "In the past it was sheet-fed printing, going into web offsetting and digital offsetting," he says. "Now we have variable imaging whereby a retailer's catalogue can be tailored based on big data knowledge of particular consumers."

Blue Star's merger with IPMG is being funded from its own balance sheet. Wolseley has not disclosed how much it put into the company, but it falls within the firm's typical range of A$30-120 million in enterprise value.

"We don't look for distressed players per se but if there is an underperforming player where the right management and the right balance sheet can transform performance then we are interested," Stuart adds.

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• Topics
• Buyouts
• Australasia
• Restructuring
• Consumer
• Australia
• Consumer
• buyout
• M&A
• Wolseley Partners