Salmat to exit letterbox drops and digital catalogues

Salmat to exit letterbox drops and digital catalogues

Catalogue marketer Salmat (ASX: SLM) has called it quits on an unsuccessful foray into digital solutions and e-commerce, entering a deal to sell its marketing solutions business to a subsidiary of IVE Group (ASX: IGL) for $25 million cash.

The move will see Salmat step away from its largest revenue generator which accounted for almost two thirds of sales in FY19.

The segment includes marketing offerings for clients such as national letterbox distribution, digital catalogues, the pre-shopping website Lasoo, e-commerce, search optimisation, display advertising and email.

On the print side the segment saw double-digit growth in FY19 but this was offset by e-commerce challenges and client retention in digital, leading to a 39 per cent drop in EBITDA to $10.2 million.

The transaction will also include the acquisition of catalogue distribution group Reach Media NZ, and IVE has announced plans for a $25-30 million capital investment program to automate the Marketing Solutions catalogue collation process prior to letterbox delivery.

The deal follows a comprehensive industry review process from Salmat's management and board, and if all conditions are met the cash transaction should be completed on 1 January 2020.

"Having considered a number of alternatives, we believe that the IVE proposal represents the best available option for employees, clients, shareholders and the Marketing Solutions business as a whole in the current market," says Salmat CEO Rebecca Lowde.

"The change in ownership will bring together our market-leading catalogue distribution business with the complementary print, data and marketing offering of the IVE Group.

"IVE is committed to continuing Salmat's innovation strategy with further investment to support the ongoing sustainability of the distribution business."

As part of the deal, IVE will provide transitional support services to Salmat, including the MicroSourcing business, post-completion until final separation takes place.

"As we work towards sale completion, we are also now considering the best future options for Salmat and the MicroSourcing business," adds Lowde.

IVE CEO Matt Aitken says these acquisitions complete the final phase of our strategic roadmap over recent years to further expand and strengthen the company's offer for the retail sector.

"The combination of Australia's largest letterbox distribution business with IVE's broader print, data analytics and marketing services offer provides an exciting opportunity for our clients to enhance returns on their marketing spend through our highly integrated offer," says Aitken.

"Importantly, the significant capital expenditure program over the next 18 months to automate catalogue collation will support the ongoing sustainability of the national walker network resulting in a strong distribution channel delivering improved ROI for IVE's retail clients."

SLM shares were up 23.64 per cent at $0.68 at 1pm AEDT, while IGL shares were stable at $10.54.

Salmat founders Peter Mattick and Philip Salter, whose family trusts each hold more than 17 per cent of the company, made headlines in August when they sold the Coolangatta Sands Hotel on the Gold Coast hotelier Joe Irvin for $15 million.

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