By: Jim Rosenberg
The deal isn’t signed yet, but Germany’s Heidelberger Druckmaschinen AG announced today that it and Goss International “reached an agreement on major issues for the intended transfer” of Heidelberg’s Web Offset division to Goss. The acquisition includes newspaper and commercial printing equipment and related post-press equipment.
Heidelberg did not disclose terms of the agreement other than to say that it will become a new shareholder at Goss International, holding slightly less than 20% of the company’s shares. Not expected to be signed for a few weeks, the deal with Goss awaits resolution of undisclosed remaining issues, completion of consultations with workers’ councils in France and the Netherlands, and approvals of antitrust agencies.
At the same time, Heidelberg said its Digital Print division will go to partner Eastman Kodak Co., which will pay no cash at closing. Kodak will make periodic performance-based payments to Heidelberg over two years. If all goals are met, Kodak will pay a maximum of $150 million in cash. Further sales-related earn-out payments over a five-year period were agreed to, if sales targets are achieved.
The transactions are major parts of a “realignment process,” announced last November, in which Heidelberg is focusing on its sheetfed offset business for commercial, packaging and label printers. “We are convinced that this strategy will lead Heidelberg back to profitability very quickly,” CEO Bernhard Schreier said in a statement announcing the web offset and digital division transfers. For the realignment, in the third quarter of fiscal 2003-2004, Heidelberg reserved Euro 525 million, mostly for depreciation of book values.
Noting diminished market volume for web offset presses, Schreier said, “The weak economy and the corresponding low levels of advertising spending contributed to this development.” In fiscal year 2002-03, the Web Offset division had sales of Euro 430 million, accounting for roughly 10% of Heidelberg’s total sales of Euro 4.1 billion. (The Digital division accounted for about 6% of total sales.)
“The market’s going to continue to consolidate — it’s just a question of who and when,” Heidelberg Web Systems Vice President Doug Gibson, remarked, citing the similar fates of firms specializing in prepress, post-press, platemaking and all consumables. For his organization, Gibson told E&P that joining Goss means that “now we have a press line for every circulation size in the world.”
Goss headquarters in Bolingbrook, Ill., referred questions to its spokesman in the United Kingdom, who said that “we’re not making any comment” beyond the prepared announcement.
Among unanswered questions are whether Goss will retain Heidelberg’s Mainstream 80 4-by-1 press, which has seen difficulties at two early installations in the U.S. and England. Goss has its own four-page, one-around press, a version of the Uniliner. The Mainstream is made in France, where Goss already has a plant making the Uniliner and Universal presses. A further unknown is whether Goss will pursue the post-press business or sell off that portion of the Heidelberg business.
A clearer picture should emerge some time after the transaction is completed — probably by the big drupa trade show in May in Germany, almost surely by Nexpo in June in Washington, D.C.
Goss already had hired Heidelberg executives, notably CEO Robert Brown, who still resides in New Hampshire and, for the last several years, has commuted to Goss in suburban Chicago.
When the deal takes effect, almost 2,100 Heidelberg employees in the United States, France and the Netherlands will transfer to Goss. Gibson said Goss will retain Heidelberg’s New Hampshire manufacturing plants — post-press in Durham and presses in Dover. The same acquisition of Harris Graphic Corp. in 1988 gave Heidelberg its plant in Montataire, just north of Paris. Goss operates a printing press factory in Nantes, in eastern France. Acquisition of Stork Contiweb gave Heidelberg splicer and dryer manufacturing operations in the Netherlands.
Transfer of the Digital Print division to Kodak also awaits regulatory approvals. The agreement covers the black-and-white printer business in Rochester, N.Y. (Kodak’s old office printer business), a 50% share in the Nexpress Solutions color-press joint venture with Kodak (also in Rochester), its wholly owned Nexpress GmbH of Kiel, Germany, and a two-year non-compete agreement.