Heidelberg to keep Gallus Group

Payment by benpac not made on 29 January 2021

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Gallus
Heidelberg to keep Gallus Group

The Gallus Group’s sale by Heidelberger Druckmaschinen AG (Heidelberg) to the Swiss company benpac holding ag has not been completed. In a press release dated 29 January 2021, Heidelberg states that benpac holding ag did not make the purchase price payment of Euro 120 million agreed at the day’s closing, although all the necessary conditions were met from its side. Heidelberg says it had to assume until the very end that the transaction would be completed successfully. “Heidelberg will assert its rights,” says the release.

The five sites and around 430 employees of the Gallus Group will remain with Heidelberg. Nothing will change for Gallus customers. Heidelberg will continue to handle sales and service for the Gallus portfolio, and their personal contacts will remain the same. Heidelberg will now be examining various options for the corporate future of Gallus. In any case, Gallus will continue on its path to boosting operating performance. With an independent setup and specific focus on its flexographic printing market, Gallus
made good operational progress last year under the Heidelberg umbrella.

Transformation program reduced debt and improved liquidity

Irrespective of the Gallus transaction, which has not been completed and now seems to be off, Heidelberg says it is already benefiting considerably from the transformation program launched in the current 2020/21 financial year. The plan to stabilize the company financially in the challenging Covid-19 environment and align it in a future-proof manner in its profitable core business seems to be working.

Since March 2020, net debt is reduced by more than Euro 250 million from a peak of Euro 390 million, and liquidity has been improved by around Euro 450 million. As a result of the accelerated M&A program, Heidelberg will generate proceeds in the mid-double-digit million Euro range from the transactions completed in December 2020 alone.

Market challenged by worsening Covid-19 situation in Europe

The market remains challenging due to the currently worsening Covid-19 situation, especially in Europe, North and South America, and Africa. Heidelberg says it is systematically continuing its transformation course with the measures initiated to create further financial scope. In operational terms, the third quarter of the current financial year saw a continuation of the upward trend in sales and incoming orders that has been ongoing since May 2020. Heidelberg continues to expect to achieve its targets for the financial year
2020-21, which ends on 31 March 2021.

Our view

The sale of the Gallus Group by Heidelberg merely revealed how seriously the Heidelberg management was taking the Covid-19 pandemic and its transformation into a leaner and more focused company. The sales, service, and supply of spare parts in many if not most parts of the world were to be continued by Heidelberg – including most likely India.

Customers were asking about the new ownership. It’s good that the uncertainty is over for them. The Gallus Group’s renewed focus as a somewhat independent entity within the Heidelberg group should work well for both existing and potential customers. The synergy in terms of agility, responsiveness, and promoting of each other’s machines by the Gallus and Heidelberg teams in India could eventually be an example for the group as a whole.

At the time of the deal, we interviewed Ferdinand Rueesch as a member of the Heidelberg board, wherein he said that one of the factors in the transaction was the need for investment in new developments by Gallus. Now, it seems that this need for cash will have to come out of the Heidelberg kitty again.

The Covid-19 pandemic led to the country-wide lockdown on 25 March 2020. It will be two years tomorrow as I write this. What have we learned in this time? Maybe the meaning of resilience since small companies like us have had to rely on our resources and the forbearance of our employees as we have struggled to produce our trade platforms.

The print and packaging industries have been fortunate, although the commercial printing industry is still to recover. We have learned more about the digital transformation that affects commercial printing and packaging. Ultimately digital will help print grow in a country where we are still far behind in our paper and print consumption and where digital is a leapfrog technology that will only increase the demand for print in the foreseeable future.

Web analytics show that we now have readership in North America and Europe amongst the 90 countries where our five platforms reach. Our traffic which more than doubled in 2020, has at times gone up by another 50% in 2021. And advertising which had fallen to pieces in 2020 and 2021, has started its return since January 2022.

As the economy approaches real growth with unevenness and shortages a given, we are looking forward to the PrintPack India exhibition in Greater Noida. We are again appointed to produce the Show Daily on all five days of the show from 26 to 30 May 2022.

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