Champ Private Equity hires Goldman Sachs to sell Blue Star

BUSINESSDESK: Champ Private Equity has hired Goldman Sachs to sell its indebted printer Blue Star Group after receiving unsolicited approaches to buy the business last month.

Goldman Sachs is assessing the approaches and looking at other possible avenues for sale on behalf of Sydney-based buy-out firm Champ, which bought its controlling 84% stake in Blue Star in 2006 from interests associated with then-managing director Tom Sturgess at a price based on an enterprise value of $385 million.

Senior lenders had agreed to maintain their support during the sales process, Blue Star said. It last year convinced bond holders to roll over $105 million of NZDX-listed bonds, extending the term and providing more financial covenant headroom.

The new bonds, which mature in September 2015, last traded at 1.2 cents per $1 face amount.

While the restructuring provided some breathing space, Blue Star’s trading has not been as strong as had been hoped when it issued a prospectus for the transaction.

In its first-half results, chairman Nick Greiner said earnings before interest, tax, depreciation and amortisation for the year ended June 30 would fall short of the $A53.6 million it had forecast as a “poor trading environment” in the first half was likely to continue.

Blue Star’s sale price is reportedly $A100 million to $A150 million, depending on the shape of the sale, the Australian Financial Review reported, though company sources called that “just speculation” and wouldn’t confirm that the sale could be completed in a matter of weeks.

Blue Star has bank debt of some $A167 million and finance leases of $A43 million. The printing group also owes Champ $16 million via a senior loan, bringing the total owed to $A226 million.

The amended capital bonds were given at $A18.7 million, compared to the value of the pre-amended bonds a year earlier of $A135 million including accrued interest.

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Good luck with that sale Goldman Sachs. I guess that dressing that puppy up for sale will be a hard task. If it looks looks a dog, barks like a dog, smell like a dog, guess what? It's a dog.

Once the offers come in at realistic levels given the poor performance, and even worse outlook, it should dawn on all concerned, that the inevitable must happen. Don't change the CEO (again), don't rely on the existing management to do things differently (again), because they can't, and most of all don't sell a good story to the market about cost reduction and efficiency. It's too late.

Put the dog down once and for all, and let the wider industry flourish. This will also put the Bondholders out of their abject misery once and for all.

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Put it this way, no potential buyer will be wanting to rely on Blue Star's / Goldmans forecasts in the IM given how wrong they got it last time around...

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The only winner out of this is Goldman Sachs. Firstly, they 'hard sell' bondholders to give up all their legal rights in the moratorium vote for a huge fee.

Then once the moratorium is approved and all those legal rights have been ceded they sucker punch bondholders in the face while they have their hands tied behind their backs.

Disgraceful.

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So,
Whats changed about the Goldman Sachs culture

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They have just gone into a trading halt on the NZX...

Finally, after various leaked media reports, it seems the directors have woken up and may be taking their continuous disclosure obligations a bit more seriously.

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After competing against these reckless traders for years it is now time to move on. I really feel for the employees most very skilled trades people but led by Bean Counters who think turnover is profit. When you are a manufacturer/printer there are no short cuts to maintain quality and customer service and if you do not charge enough for this service then you make a loss. It is my wish that the Print Industry can now move forward make a profit re-invest in new equipment and ensure our employees of their future with our privately owned and operated companies.

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I could not agree more with Printer Bob, the market dearly needs the demand, most of the good people that have done the hard yards within Bluestar will be re-employed, as for the senior management team, I'm sure someone, somewhere needs a hole to be dug. My best wishes go out to all the Mr and Mrs Bondholder who will effectively get nothing, not even an apology! Shame you you senior managers who have never acted in the best interests of the business, you know who you are!

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Good one Bob "the printer" - im pretty sure between you and GEON you can put your hand up for setting most of the pricing levels that I and no doubt the Blue Star boys have been trying to follow just to compete

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it's been the old problem of too many chiefs and not enough indians - maybe that will change following any buyout....

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More like too many YES men, not enough real managers.

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Does anyone know how much equity CHAMP has taken out of BS over the last six years? [not including the $100m haircut to bond holders].

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$100m in the first year. It did not get re invested. They are not in the business of Investing, it's making money out of businesses that cannot manage themselves. The independant owners are bought out, and the bean counters who know nothing about print move in. They have no clue what to do and bring in more business experts with no print experience. So it goes on, reducing the Indians and increasing the chiefs!

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The real problem with all of this is not just the issues raised above, but the affect that this is having on the supply base, staff, and the customers.

If I was a paper merchant supplying to BSPG at present, I would be driving empty trucks to the sites to pick up any of my paper that was not yet paid for ASAP.

If I was a customer, I would be seriously reconsidering why I should support BSPG given the current situation and the likelihood of actually taking delivery of what I had ordered. Especially if it was finished goods in store.

If I was a staff member, I would be seriously thinking about why I have to deal with the day-to-day stress of managing all of this, apart from the obvious fact that I need a job.

The current situation is at best tenuous for all concerned, not pretty, and will only get worse as time goes on.

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Unfortunately this is a large scale of what they've done to everyone else in the industry through their anti-competitive ways.

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Everybody being so hard on Goldmans, they're only 'Doing Gods Work'

http://blogs.wsj.com/marketbeat/2009/11/09/goldman-sachs-blankfein-on-ba...

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What bank in their right mind would fund a purchase, or any part of it given the past history of these print consolidators? Bank of Scotland lost over $200m with the funding of GEON and now it appears that a few banks and investors will incur significant losses over the latest BSPG news.

The private equity approach to the industry has ended up being a scourge, with funders and investors cast aside in the chaos that has reigned. All of this along with a lowering of prices, standards and craftsmanship all hidden behind a facade of "print management" and "full service approach".

The latest CEO states “It’s got a great business, a fantastic business,” he said. “We’ve got unparalleled market positions on both sides of the Tasman, we feel pretty good about things.”

Poppycock.

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Sad part is that the contracts will most likely be picked up by brokers offering logistics expertise and some smart "transparent" reporting, screwing margin with no manufacturing overheads to consider as the blind cut prices thinking there is security in turnover...
Yeah Right!

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The only way that Bluestar can suvive, as a whole, or in part, is if the management, and the management of the indivdual companies are sacked and replaced with proven perfomers from within the print industry. In any other business, this would have happened a long time ago. A managers job is to show their skills in businness when times get tough, not to use excuses, Sure, times have been tough, but managers and owners of other print companies have still been able to turn over a profit. Why is this?, because they have a vested interest in the company and actually care. You can not have people managing companies who only care about lining their own pockets, it doesnt work, as has been proved by Bluestar. My sympathies to all of the bond holders who will lose money and all the people who work for the Bluestar companies who do a great job and should have been appreciated ( not just words on paper ), for the good work that you do.

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This is so true. Mediocre people that ran out of ideas years ago, sitting in Parnell in a boutique, flash office, completely remote from where the real issues are. Dreaming up weird and wonderful ways to package up the same old smoke and mirrors.

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As an ex employee of one of the BS business units I have to agree with #15 that the management style employed over the last 10 or so years, by essentially the same tired visionless management team, has let everyone down and there needs to be a good cleanout from the top down to, and including, the individual businesses.
If all of the individual companies are managed in a similar fashion, and I suspect they are, then it is not any wonder that BS is now on the block.
I also can't help feeling sorry for bondholders who have lost their money and the many employees who are waiting apprehensively to find out if they are still going to have jobs when the dust settles.

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I am a competitor to Blue Star. We have had to walk away from significant business because of the marginal pricing approach taken by Blue star and previously Geon.

It has been noticable that their low pricing approach has come in 'waves' where suddenly for a period of 2 to 3 months they win every job at any cost. Its happening right now and has been for the past 4 weeks.

It looks like they periodically need some metrics to hold up to someone so they dam the torpedos, grab every job they can and worry about the results later (assuming they survive the latest test).

They may buy better than we do, however not 40% better. There is not 40% to be had anywhere, especially when paper merchants have to carry massive bad debt insurances (mainly due to their exposure to big print groups).

The question most printers ask is how can they do it? Of course the answer is they can't .

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I agree with the comment that the pricing drops very low for periods of time. May be they do it everytime it looks like they might go under. That would explain alot. What should I tell my customers. "I cant compete cause Blue Star are insolvent and trying to pretend they not!"

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All these comments are true and relevant but didn't we hear the same things last year ? Still BSPG exist. Why? When is someone going to finally pull the plug and say enough is enough?

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They have. Read the article above.

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This was put out yesterday afternoon - cut and pasted.

"24 July 2012
NZX Market Supervision Announcement
Blue Star Group Holdings Limited (“BLU”)
Trading Halt of Securities
NZX Market Supervision advises that, at the request of the company, it has placed a trading halt on Blue Star Group Holdings Limited Capital Bonds (BLUFC), pending the
release of an announcement to be made by BLU.
ENDS"

I doubt if Goldman Sachs and senior Bluestar management on both sides of the Tasman have contingencies in place for creditors, rent liabilities, not to mention the staff liabilities..... all will be asking the same question, "will I get my money"?

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We also need to consider the wider supplier base and how this will effect them, What other print group management team will be able to spend massive amounts of money in Parnell coffee shops, or Viaduct Restaurants?

Expensive vehicles, Golf sponsorship, flash Bespoke offices...... just hope they paid cash.

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Peter Warden, no punch line needed.

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The trouble Goldman Sach's will have is that they are trying to sell a hollowed out carcass.

Normal machinery asset value that would be expected in a major manufacturing business like Blue Star, has long since been sold off and leased back. The other major asset is 'intangible' ie; goodwill.

Intangible it is, goodwill it is not.

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Probably will turn out to be Kalamazoo making a bid, given the sale process is based in NZ. Are they not just the latest in a line of people hoping that size will equal enhanced profit or market power in print? Maybe they're cleverer and can make that model work. maybe they're not.

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I see Roger France has just bailed out...

Surely this business is trading while insolvent. There is no way the value of its assets are greater than the value of its liabilities (therefore is is insolvent), yet the directors continue to incur costs and therefore (unless everyone is being paid in cash) unsecured liabilities that it cannot meet.

Is this is not reckless trading then what is?

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I see the last sentence in the latest Blue Star announcement to the stock exchange this afternoon more or less confirms that the bonds now have ZERO Value. Go figure.

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How can they conduct a sale negotiation in one month? It's not realistic is it? Why the hurry? Doesn't make sense to me.

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@ #27 Because the interest bill is piling up so it is in the company's best interests to sell ASAP.

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You're right - I was just thinking the bank/bondholders might get a better answer from a wider/slower sale or tender. I'd be buying Webstar if I could afford it. Silent achiever, good business.

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They should have listened to Climo's NZ vision off reducing offset and get into digital 5 years ago. It could have been a totally different outcome. The true leaders got pushed and/or driven out. This left to many "yes" men. When trouble started to afraid to move and change.

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David made sure that anyone who challanged his vision was put on ice, including Climo himself!

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vision in inverted comas - bad restructuring and politics and playing favourites

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Christ - does Climo actually know how to spell the word digital?

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Is that you Romminger? Trying your best to fly under the radar again.

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Well done Phillip Bower and David Jupe, What an excellent job. You must be proud of yourselves. Congratulations, I am sure all the bond holders and employees appreciate your efforts.

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David Jupe? Is he still there? Goodness me.

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It appears it's "business as usual" and creditors will be paid "as usual" according to Bluestar management.
Something I find very hard to comprehend, as why is it "business as usual" when that style of business hasn't worked in the past and has effectively put them in the position they are in today, very poor form indeed and as most of the posts suggest, it will be the loyal and very competent staff (not the senior management) that will be left "holding the bag" as it is their relationship with suppliers that has retained some continuity of consumable and paper supply - poor buggers!

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Something like $150mill of value destroyed by people whose only ideas are about scale and commodities and acting like bullies. $150mill of other peoples money.

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The above posts accurately reflect the concerns and frustrations of all bondholders, suppliers, competitors and employees who had no control over the developments that have brought it to its knees.

The boys in their Auck. ivory tower and puppet management in the individual business units are the ones that are solely responsible and hopefully some of them will now be feeling very uncomfortable.

I wonder if anyone has thought to recall/cancel all of the credit cards that management have been thrashing in the last 12 months with gay abandon around the most expensive restaurants and hotels? Not to mention 200k Audis, marquee at the Wellington Cup, Martinborough Wine Festival, Mangatainoka Tui rugby, trips across the ditch, etc., for the elite few.
My guess is that it is business as usual - party on while Rome burns!

You could say we have all been 'J'uped.

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The low point for me was word that Blue Star Parnell Office celebrated large the night they got the YES vote from bondholders last year. Maybe a quiet 5 minutes considering the $45mill we agreed to burn that day might have been more appropriate.

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Quite galling when David Jupe, only hours before gave an impassioned speech from the floor imploring bondholders "not to vote against the proposal to reduce their returns and give his staff a chance to create value in the business". He went on to say "don't vote on the principal - vote on the hope". What the hell does that tell you about the man?

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The man is living in a dreamworld, where the colour of the sky is quite different to everybody else's......

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Crickey guys, I'm a printer with BS, and what you describe is very accurate of the management as a whole. It survives on our craftsmanship alone...

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I think all involved would agree that the only good thing about the whole sorry business is the determination of the tradesmen and women keeping it all going under very stressful circumstances. It is when the chips are down you find out what your leaders are really made of and sadly they have been found lacking moral fortitude.

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