Heidelberg sells Gallus for €120m

27 July 2020

Heidelberg has agreed to sell off label printing wing Gallus as part of its ongoing strategy to focus on its core sheetfed business.

The relationship between the two companies stretches back more than twenty years. Heidelberg acquired a 30% stake in Gallus in 1999, and took over full ownership of the Switzerland-headquartered label printing specialist six years ago.

That deal resulted in Gallus owner Ferdinand Rüesch becoming Heidelberg’s largest single shareholder at the time, after he accepted Heidelberg shares for a large chunk of the business.

Heidelberg’s share price was €2.57 then, but has since descended to an all-time-low and has been trading at less than €1 since the end of January, falling to €0.48 at one point.

The deal to sell Gallus to Swiss-headquartered Benpac Holding was announced yesterday evening (22 July) after the close of trading.

Benpac is a privately-owned group that has grown through a number of acquisitions. Last year it acquired Muller Martini’s manufacturing facility in Stans, Switzerland, where Benpac is headquartered. The group employs around 3,150 people and is “primarily active in the USA and Asia”.

Former Heidelberg chief technology officer Stephan Plenz, who officially left the press manufacturer on 30 June, joined Benpac Holding’s board of directors on 1 July.

Heidelberg is selling the Gallus business for €120m and expects to make a gain of “mid two-digit million-euro” on the deal, which should be finalised by the end of the year.

One label industry expert commented: “It was a big shock for me, I always thought Gallus was one of the bright parts of Heidelberg. It really seems that they are focusing right down on core business, which is probably what they should be doing in tough times. It looks like a good price.”

Heidelberg will continue to supply the digital printing unit and consumables for the Labelfire digital press.

Chief executive Rainer Hundsdörfer said Heidelberg would still be active in label printing via its sheetfed offset offering.

“We are selling our narrow-web rotary and rotary flexographic printing activities to focus more closely on innovative solutions for the entire printed sheet value chain. We will be retaining our in-house digital expertise and, by collaborating with Benpac on the Gallus Labelfire, we will also be making further progress with the digitization of conventional presses,” he stated.

The deal incorporates related businesses across five sites, employing around 430 staff: Gallus Holding and Gallus Ferd. Rüesch in St Gallen Switzerland, and German operations Gallus Druckmaschinen in Langgöns, Heidelberg Web Carton Converting in Weiden in der Oberpfalz, and Menschick Trockensysteme in Renningen.

The sale is subject to approval and the meeting of certain conditions.

Heidelberg’s CERM narrow web MIS business is not part of the deal, but the disposal of Gallus has raised a question mark over its future within the group if Heidelberg continues to dispose of non-core businesses.

Heidelberg said that Ferdinand Rüesch would remain with the Gallus business and was still the second biggest shareholder of Heidelberg (behind Masterwork Group) and a member of its supervisory board. “He is supporting this transaction,” a spokesman said.

Heidelberg posted a huge net loss of €343m on sales down 5.7% at just under €2.35bn in the year to 31 March, and CFO Marcus Wassenberg said the deal would be “a big help” in improving the group’s financial position.

“Our aim is to ensure the long-term financial stability of Heidelberg, and all the measures since our transformation started in March this year have been geared toward this objective,” he said.

“Selling the Gallus Group is another key part of our realignment and follows on from the successes we have achieved so far during the transformation process. This further major boost to our liquidity and group equity will be a big help, especially during the coronavirus crisis.”

Heidelberg held its AGM today. Shares rose by nearly 7% to €0.68 following the Gallus news.

At the AGM, Hundsdörfer said: “We are pressing ahead with the realignment and making great strides: reducing net financial debt, strengthening equity, streamlining the organisation and focusing on profitable core activities.”