Letterbox and online advertising specialist Salmat (ASX: SLM) is set to sell-off its Australian catalogue distribution business, Salmat Marketing Solutions, to marketing services provider IVE Group (ASX: IGL) in an all-cash $25 million deal.
The deal will also include Salmat’s New Zealand-based operations in the form of separate company Reach Media New Zealand Ltd.
Upon announcing the deal, Salmat also confirmed that the company is currently “considering the best future options” for Salmat and its MicroSourcing business with further updates to be announced in due course.
Salmat was first founded by Phil Salter and Peter Mattick in 1979 with the company attaining sequential growth over the past 40 years on the back of multichannel marketing demand and sharp growth in consumer retail sales across Australia..
Currently, its marketing solutions business incorporates Australia’s leading catalogue distribution network with a reach of up to 17 million Australians in 7 million homes each week.
The company attributed offloading its marketing solutions unit to “addressing sustainability in the catalogue distribution network” following a comprehensive industry review process undertaken by its senior management and at board level.
In a bid to expand its own market footprint, IVE has pulled the trigger on acquiring Salmat’s business and has declared that the acquisition will be earnings accretive in the current financial year.
IVE Group to absorb Salmat’s marketing solutions
IVE enables its clients to communicate more effectively with their customers by creating, managing, producing and distributing content across multiple channels.
The company currently employs 1,800 people across Australia, China, Singapore and New Zealand.
According to IVE, its clients hail from a broad range of sectors and industries including financial services, publishing, retail, healthcare, communications, property, clubs, associations, non-profits, utilities, manufacturing, education and government.
“Having considered a number of alternatives, we believe that the IVE proposal represents the best available option for employees, clients, shareholders and the Marketing Solutions business as a whole in the current market,” said Rebecca Lowde, chief executive officer of Salmat.
“The change in ownership will bring together our market-leading catalogue distribution business with the complementary print, data and marketing offering of the IVE Group. IVE is committed to continuing Salmat’s innovation strategy with further investment to support the ongoing sustainability of the distribution business,” she added.
Incoming capital boost
IVE said the acquisition will form part of its extensive production and distribution offering and will continue to operate as standalone businesses in both Australia and New Zealand.
Furthermore, IVE added it plans to bolster its acquisition by investing a further $25-30 million in capital to automate the marketing solutions catalogue collation process prior to letterbox delivery for the existing Australian walker network of 12,000 people.
As things stand, both Salmat and IVE expect the acquisition to be completed on 1 January 2020 with IVE saying that it will provide transitional support services to Salmat, including the MicroSourcing business upon post-completion until final separation takes place.
IVE chief executive officer Matt Aitken explained that the Salmat acquisition completes “the final phase of its strategic roadmap” over recent years to further expand and strengthen its retail sector offering.
“The combination of Australia’s largest letterbox distribution business with IVE’s broader print, data analytics and marketing services offer provides an exciting opportunity for our clients to enhance returns on their marketing spend through our highly integrated offer,” said Mr Aitken.
“Importantly, the significant capital expenditure program over the next 18 months to automate catalogue collation will support the ongoing sustainability of the national walker network resulting in a strong distribution channel delivering improved return on investment for IVE’s retail clients,” he said.
Announcement of the acquisition this morning helped Salmat shares to rise by over 25% up to $0.69 per share while IVE shares ticked lower by 0.48% to $2.06.