COMMENTARY: Tribute on Merger Talks Breakdown
This brings me to the subject of the merger. Major over capacity in press manufacturing, particularly in Germany, while at the same time as a real drop in order intake, made everyone in the industry and its financiers sit up and think. The concept of a merger between Heidelberg and manroland made a lot of sense particularly if some operations could be spun off. The logical spin off was the manroland sheet fed division, as Heidelberg was by far the leading player in the market. manroland however is the leading player in the web offset area for both commercial printing and newspapers. It was a logical blend if someone could take on the manroland sheet fed press business. Speculation was that the company to do this would be Shanghai Electronics, but they were seriously tied up in investing to be the second largest shareholder in the Goss web offset business. One has to wonder why it was thought they would be a suitable company to move into sheet fed offset when one of their main interests is in building up their inkjet business.
This brings me to the crux of my argument. I believe that for the merger to go ahead that a substantial investment would be needed to make it happen. Since that now appears unlikely to come from the sale of the manroland sheet fed business, the funding would have to come from the investors. Here is the problem. manroland has not been the get rich quick investment that Allianz had hoped for, and they certainly would not want to put in more money for a small share of the combined company. The briefing to Reuters that manroland were pulling out of the merger because of the lower than expected level of orders in Heidelberg is in my opinion to use the American term, pure BS. In fact from what I see, despite the lower level of orders in Heidelberg, the company has been successful in its cost reduction measures freeing up cash flow.