It's an understandable objection from the ACCC, given the combined PMP/Hannan would represent ~65% of the Aus printing market. That was part of the reason i sold out when the stock briefly traded up to the mid-80 cent range in late October post the merger being announced - that sort of pricing assumed: 1) no ACCC issues, 2) near-flawless execution of merger with full synergies being realized, and 3) no further deterioration in the volumes of catalogues being printed.
Regarding point 3) above, i think this is something a lot of analysis is simply glossing over, and i think it's something that the industry seems to be in denial about. The printing industry as a whole (and certainly PMP) has been left with its significant overcapacity issue primarily because volumes of books, directories and magazines have collapsed over the last decade. The only bright light for printers over the last decade has been that catalogue volumes remained resilient - as can be seen on p7 of the report accessible via the link below, catalogue volumes were still growing until FY12:
However, since FY13, catalogue volumes commenced shrinking at an alarming rate, and that trend is continuing judging by PMP's trading update of Dec 16th. PMP and the catalogue industry at large can say all they want about how effective and important catalogues are, but that doesn't reconcile with the facts that catalogue volumes have been shrinking rather alarmingly since 2013. It doesn't take a detailed financial model to figure out what's going to happen to print industry margins and profitability if you have relentlessly declining volumes, coupled with costs (occupancy costs, employee costs etc.) that are likely to be rising roughly in line with inflation.
PMP Price at posting:
65.5¢ Sentiment: None Disclosure: Not Held
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