Gretag: Cash from Oce Acquisition to Help Strengthen Balance Sheet
Press release from the issuing company
12/3/01 - Based on the new business plan Gretag is to focus in future on its core business of consumer imaging. The Professional Imaging Division has been sold. Proceeds from this transaction will be used to restructure Gretag’s debt. Gretag has reached an agreement under which various financial partners will reduce Gretag’s total borrowings by CHF 271 million and has revised certain repayment terms. This marks a major step towards putting the company's finances in order. A package of measures to complete the refinancing will be submitted to an extraordinary shareholders' meeting.
Gretag’s negotiations with Océ to sell for an undisclosed amount the parts of the company active in the area of professional imaging were successfully completed on November 8th. The sale follows the successful development of the Professional Imaging Division within the Gretag Group. In a relatively short period of time, the various companies making up the division were welded into a powerful, efficient and successful unit.
The sale of the former Professional Imaging Division was necessary in finding a solution to the current financial problems, and was crucial to the success of the negotiations with the leading Swiss commercial banks. They have agreed to a fair, reasonable and forward-looking solution. Gretag will use the proceeds from the sale of the Professional Imaging Division to eliminate most of our Swiss bank loans, except for one credit amounting to CHF 24 million. The parties have agreed not to disclose the other conditions. This agreement will enable Gretag to thoroughly restructure its balance sheet. The agreement with the banks marks a milestone in putting the company's finances in order.
This solution does not provide the Group with new capital, so the liquidity situation remains challenging. In the medium term, however, the prospects in this respect have also become much brighter: The repayment of outstanding loans that would have fallen due in the near future will now no longer be necessary; this applies in particular to the repayment on January 31, 2002 of the syndicated loan of CHF 50 million made by the banks in the spring of 2001. The corresponding cost of servicing these loans will also no longer be incurred. Moreover, various other measures have been initiated or already implemented that should secure our liquidity in the medium term.
The new business plan worked out by the management of the Gretag Group takes account of the changed worldwide economic conditions, the industry-wide decline in sales revenues and the heavy cost structure that existed at Gretag at the beginning of this year. The new Gretag will in future focus on the consumer imaging market. In particular, digital image processing holds out the promise of great potential in the coming years, a potential in which Gretag with its outstanding products can participate. Gretag will offer its customers even more comprehensive solutions in this field than in the past. The greatest market potential is with central labs, photo chains, photo retailers and online photo finishing. Gretag has set a sales target of over CHF 400 million for 2002, spread over the three market regions North and South America, Europe and Asia-Pacific. This will enable Gretag to return to profitability in the coming year.
The process of making Gretag a lean company that started at the beginning of this year is now very far advanced and will be completed by the end of this year. This effort has reduced our cost structure by more than CHF 100 million. Dr Patrick W. Jung will, as planned, become Chief Executive Officer of the new Gretag in the coming year. Production will be concentrated at the current production sites, and streamlined with emphasis on quality improvement and further efficiencies. Restructuring solutions have been found and already implemented for the Gretag sales companies in various countries and for the Canadian-based Telepix Inc. Once the current round of restructuring has been completed, the number of employees will be around 1,300 Group-wide. The current business unit structure will be adapted to the new Gretag and will have a more focused market approach. Gretag will operate as a single firm.
The greatly improved balance sheet structure together with the new business plan form the basis for attracting new investors and bringing about the final steps of the recapitalization of the company. The aim is to work out a comprehensive and complete solution to the financing needs. Initial steps have already been taken, and negotiations with potential partners are underway. The Board of Directors will submit an overall package including a proposal for creation of additional 3.9 Mio. shares for approval to the shareholders of Gretag Imaging Holding AG at an extraordinary shareholders' meeting planned for December 4th.
The breakthrough, achieved after intensive work, has opened the way for a gradual renewal of the Board of Directors. Two directors, Dr. Marc Ronca and Kathy Misunas, have resigned from the Board. The Board of Directors of Gretag wishes to thank the two members for their outstanding contribution to the development of the Group and for the services they have rendered. New additional members of the Board will be appointed at the Annual General Meeting in May 2002.
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