The big Bong theory
Merger with Hamelin sees creation of Europe’s biggest envelopes company
The agreement in September between Sweden’s Bong Ljungdahl and French stationery group Hamelin to merge Bong Ljungdahl with Hamelin’s envelope division will create Europe’s largest envelopes company in a sector that has struggled with falling demand in recent years.
The new company, to be known simply as Bong, will have a combined turnover of around E370 million ($500 million) and approximately 2,400 employees.
The agreed deal structure is that Bong Ljungdahl will acquire Hamelin’s entire envelope business for a total of around N45 million.
Part of the payment is via a share issue and convertible bonds that will give Hamelin a 29.9 percent stake in the new company, making it the largest single shareholder.
"We will increase our customer focus in order to become an even better supplier and our aim is to develop and grow together with our customers. The
merger gives us enough scale and a good platform to do this," said Bong’s President and CEO Anders Davidsson, who will continue to lead the company after the merger.
"After several years of close cooperation, we know the Hamelin organisation well and we complement each other in a good way. With the merger we are able to extend our product offering significantly and, furthermore, we widen our geographic coverage, especially with the units in France, Spain and Poland."
Hamelin’s President Stéphane Hamelin, who will join Bong’s board of directors following the transaction, commented: "This merger will ensure a brighter future for our envelope division. I’m confident that our strategic investment into the new Bong company will bring us long-term success in the envelope business."
The date for the acquisition to be completed is 22 October 2010 and is conditional upon a resolution to approve the transaction at an extraordinary general meeting at Bong on that date. Bong says that shareholders representing 68.5 percent of the shares in Bong Ljungdahl have already expressed their support for the transaction, which is supported unanimously by the board.
Bong and Hamelin have cooperated in a strategic alliance since 2004 and this merger marks the next step to create a stronger European company with a broader geographic reach and larger product portfolio.
A good fit
The two companies are a good fit. Hamelin’s envelope business has 19 entities in six European countries – France, UK, Germany, Poland, The Netherlands and Spain – while Bong is active in 12 countries, mainly in Scandinavia, northern Europe and Russia.
In terms of product portfolio, Hamelin has a strong envelope brand with Oxford and a strong presence in the direct marketing sector, while Bong has developed niche lightweight packaging envelopes such as its ProPac range and has the licence for Tyvek-branded envelopes. The deal comes as part of a major shake up of the European envelopes industry as demand in the main markets is expected to fall by as much as 30 percent in the three years to 2011.
Robert Donderwinkel of the European Envelope Manufacturers Association (FEPE) says the current size of the EU market is estimated at around 80 billion units, plus another 10 billion for Eastern Europe.
Donderwinkel told OPI: "The market reported sizable decline in demand in 2009 due primarily to economic conditions, with lower all-round business volumes and specifically lower advertising/direct marketing budgets."
"The market has stabilised somewhat in 2010, although it is still under pressure from competitive channels."
Earlier this year, Germany-based Curtis 1000 said that it was entering insolvency proceedings, while last month leading French producer GPV announced
a major restructuring plan, revealing that it was in advanced talks to sell off its envelopes distribution business to Spanish rival Tompla.
Providing this deal goes through, that will leave three major players in the European market: Bong, Tompla/GPV and Germany’s Mayer.
Three core areas
The agreement with Bong leaves Hamelin to focus on its three core product areas, each of which has a strong brand: filing (Elba), books and pads (Oxford) and fine arts (Canson).
"We didn’t have the financial resources to be leaders in four product areas," Stéphane Hamelin told the French national press.
It will also raise speculation about Hamelin itself now being a more attractive takeover target.
Esselte has been in acquisitive mood of late, snapping up Rapid and Ampad, and its private equity owners might now view an envelope-less Hamelin as a better fit with its existing business in Europe, especially in key markets like the UK and France.