manroland finds a new owner in Possehl

Ralf Schlozer
Jan 19, 2012

… well almost. The Possehl group is only taking over the Augsburg site and the creditors committee can only give a recommendation which buyer and which investor concept to pursue. Although the recommendation is a strong one, the final decision will be made at a forthcoming meeting of the creditors. Still for a company the size of manroland having agreed on a concept in less than two months after declaring insolvency this is quite a fast pace of events.

The concept is to split manroland into three independent units, based on its three separate manufacturing sites. The new investor, Possehl, is only taking over the Augsburg site, which produces the bulk of the web-fed offset presses (and understood to be the most competitive part of manroland). manroland enjoys a very strong market position in web-fed presses and the service business alone should keep the site afloat. Currently 2,200 employees work at the Augsburg site, which will be brought down to 1,500.

The factory in Plauen will be outsourced as a new company and there are signs that a third party will take over this site. The Plauen site used to produce smaller web-offset presses, but most recently the production of smaller web-presses was either given up or brought to Augsburg with Plauen mainly delivering press components to Augsburg. Possehl plans to establish long term supplier relationships with the Plauen site in order to secure full capacity of the site. Possehl voiced interest in taking over the Plauen site as well sometimes in the future. Most recently the Plauen site had 680 employees of which 290 will be kept.

The Offenbach site is the manufacturer of sheet-fed presses. Cuts in recent years to cope with the stiff competition in sheet-fed presses saw the site shrink and outlying sites in the region closed and consolidated into Offenbach. While the presses are recognized to be of a high technical standard, manroland has lost ground in sheet-fed presses and a turn-around would be difficult to achieve. The investor concept assumes that the Offenbach site will be restructured to allow for a management buyout in cooperation with an investor, although the financing concept for such a deal would require a guarantee from the German state of Hessen. The press release of insolvency administrator Schneider Geiwitz & Partner describes the site having a “solid economic foundation and good future prospects”, but with a lot of overcapacity in sheet-fed press manufacturing and formidable competition there is little room to become competitive again by itself. According to the investor plan over 1,000 jobs will be lost in Offenbach and only 750 will remain. Until recently the site had 1,900 employees, down from almost 5,000 back in its heyday. The site will continue to be run by the insolvency administrator until an investor is found. Rumours have it, that this might be Chinese company, although this could curb the willingness of the Hessian government to provide guarantees. A Chinese manufacturer could bring production costs down significantly and with the know-how of manroland it could become a formidable competitor to the German and Japanese press manufacturers. However, if this were to transpire and production was relocated to China to achieve the largest possible cost reduction it might not save many jobs in Offenbach in the end.

The parties involved have agreed to remain silent on the purchase price. The final decision on the purchase will be made at the meeting of the creditors. For the time being all sites continue to run as before. All sites will be allowed to use the name “manroland”, but will be required to add a suffix to distinguish the sites. How the international subsidies and sales organisations are to be divided up is still to be discussed.

In total under this proposal the headcount at the three German sites will be halved to 2,500. This announcement comes within a week when Heidelberger Druckmaschinen published plans to shed 2,000 employees as well. The Possehl plan for manroland has the backing of the trade unions nevertheless. With a still strong engineering sector in Germany the outlook for former employees is fairly good.

There were two final bidders for manroland: the Possehl group and U.S. investment company Platinum Equity. The bidders could not have been more different: Possehl as a German long term investor compared to venture capital group Platinum, with a shorter term buy-fix-sell business approach. Possehl had already worked out a detailed concept on how to run manroland and had the backing of the unions and workers’ councils, despite only wanting to take on the Augsberg site. Platinum bid for all sites and didn’t put forward detailed plans for how it would operate the business and did not gain the support of the unions and workers’ councils. This was down to the Platinum’s reputation as private equity company trying to maximise short term profits, and because a few German companies have already bitten the dust under its ownership. The only communality is that both companies have no background in printing presses, although some stakes in the Graphic Arts industry. Possehl owns mailing system manufacturer Böwe, while Platinum recently acquired Quark and Kodak’s image sensor group.

The most likely upcoming owner – Possehl group – is owned by the charitable Possehl foundation. The group started out as a coal and iron trading company in the hanseatic town of Lübeck in 1847. Over time the group morphed from a trading group into a holding company with a diversified portfolio through M&A. The group has nine divisions in construction, trading, plastics, electronics, cleaning systems, textiles, metals processing and the most recently added mailroom systems division. This was created by buying Böwe Systec out of bankruptcy in 2010. Böwe added 1,200 employees to the Possehl group, significantly increasing the size of the group. Currently the group owns 130 companies with about 8,500 employees around the world, but the main focus is on Germany. Revenues in 2010 were €1.7 billion, up from €1.2bn in 2009, partly due to the acquisition of Böwe. Most companies in the group fall into the SME range. Companies in the group enjoy a relatively large degree of entrepreneurial freedom. The holding company is quite lean and does not usually interfere in the running of its member companies. The group is set up for long term stability and does not usually sell-off any member companies.

By adding 1,500 employees and an approximate annual revenue of €400 million to €500 million the acquisition of manroland’s Augsburg site could well be the biggest deal for Possehl so far. Possehl was profitable over the last 5 years, even during the financial crisis, but still this is a big chunk to swallow. There are rumours of manroland being joined with Böwe, but apart from both being based in Augsburg, there is little overlap. Not everything is sorted out for manroland, but the start in 2012 could have been worse.

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