Opus Group Pty Ltd - Ovato Book Printing (Ovato Limited)

Acquirer(s)

  • Opus Group Pty Ltd

Target(s)

  • Ovato Book Printing from Ovato Limited

Summary

Opus Group Pty Ltd (Opus) proposes to acquire Ovato Book Printing, which is the book printing business of Ovato Limited (Ovato).

Ovato's two principal businesses in Australia are Ovato Book Printing and Print Australia, Ovato's commercial printing business.

As part of the proposed acquisition, Ovato will also issue a convertible note to Opus, which is convertible at Opus' election into fully paid ordinary shares in Ovato (equivalent to approximately 15% of Ovato's issued share capital). Ovato, post disposal of Ovato Book Printing, would solely consist of Ovato's commercial printing business, Print Australia.

Opus, through its book printing division, McPherson's, and Ovato Book Printing overlap in the printing of books that are sold in Australia, including books printed using digital and offset printers.

Opus' commercial printing business, CanPrint, overlaps with Ovato's Print Australia business in the provision of certain commercial printing services. Commercial printing includes the printing of brochures, newspapers, labels and financial documents.

Market definition

The ACCC considered the impact of the proposed acquisition in markets for:

  • the supply of mono (black and white) printing of read-for-pleasure books in Australia, and
  • the supply of commercial printing services in Australia.

The ACCC did not need to reach a concluded view on the precise definition of this market, as it would not significantly alter the competition assessment.

Competition analysis

Mono printing of read-for-pleasure books

Opus’ book printing division, McPherson’s, overlaps with Ovato’s book printing business unit, Ovato Book Printing.

The ACCC considered that the transaction would combine the two largest suppliers of mono (black and white) printing of books that are sold in Australia.

Post-acquisition, Opus would be the dominant supplier of these book printing services with significant market power.

Market participants raised concerns that Opus could increase prices or reduce service levels or quality. These participants also raised concerns about the loss of capacity if Ovato ceased supplying these services.

Market feedback indicated that other suppliers such as IVE and imports appear to exert limited competitive constraint and that barriers to entry or expansion are high.

However, while the proposed acquisition was likely to result in a lessening of competition compared to the state of competition in the market at the time of the ACCC’s investigation, that level of competition was unlikely to continue in the future. Based on available evidence, including expert insolvency advice, the ACCC concluded that if the proposed acquisition does not proceed, Ovato would likely and imminently become insolvent, and there was a real chance that its printing capacity would exit the book printing market.

Commercial printing

Opus’ commercial printing business, CanPrint, overlaps with Ovato’s Print Australia business in the supply of certain commercial printing services. Following the proposed acquisition, the Print Australia business will continue to be operated by Ovato. 

The ACCC concluded that post-acquisition, Ovato, notwithstanding Opus’ stake, would still face competition from other suppliers, such as IVE.

 

Market inquiries

Document title Date

Timeline

DateEvent
25/05/2022ACCC commenced informal review under the Informal Merger Review Process Guidelines.
03/06/2022Closing date for submissions.
14/06/2022ACCC announced it would not oppose the proposed acquisition.