Print and distribution businesses Ovato announced a $40 million rights issue and restructure aimed at saving 900 jobs in the Australian manufacturing industry.
The plan, to prevent possible insolvency, includes 300 redundancies mainly through the closure of the Clayton printing plant in Melbourne.
The majority Ovato shareholder, the Hannan family, and Are Media, owned by Mercury Capital, have agreed to underwrite $35 million of the rights issue.
The funds raised will be used for additional liquidity, to repay debt and for "operational initiatives".
“Print-based industries have been significantly affected in recent years and the COVID-19 pandemic has increased the pain this year for many parts of our group," says managing director Kevin Slaven.
“Our industry has gone about as far as it can with mergers and consolidations in the last five years. Ovato has suffered losses for several years because of the costs of measures to meet the reduced demand for printed communications.
"This restructure allows for the company to get back to profitability and a sustainable future.
“Unfortunately, it means that over 300 employees will lose their jobs. However, the restructure will save 900 other jobs because the company would be facing an uncertain future without the restructure we are proposing.
“The proposed new equity, underwritten by two significant players in the printing and media sectors, together with the indicative support of our major suppliers and financiers to restructure our balance sheet, provides the foundation for a viable, sustainable and exciting future for our Group.
“Critical to the implementation of the scheme, there will be no impact on our customers or all other suppliers outside of the Scheme, other than the positive impact of providing the Company with a stronger balance sheet and a viable, sustainable future.
"Our view, and the view of the independent expert, is that without this scheme, the outlook for the whole group is unpalatable. We have searched for alternative solutions to the massive disruption in our industry, but they were unworkable.
“The scheme will reduce our cost base, make us more sustainable and provide customers, suppliers and the 900 remaining staff certainty around a viable and profitable future.”
Ovato operates in Australia and New Zealand with print, distribution and marketing services.
The company posted a net loss after tax of $108.8 million last financial year on revenue of $539.3 million.
Creditors will meet November 30. All Ovato businesses outside of the Australian print operations are unaffected by the restructure.
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