Kodak sells Flexo division to Montagu (Updated)

Kodak has sold its Flexographic Packaging Division to Montagu Private Equity LLP in a deal said to be worth up to $390 million. The deal should be finalized in the first half of 2019, subject to the usual regulatory approvals.

Kodak’s Flexcel NX Ultra system consists of new plates and processor able to use a new water-based cleaning and processing.

Montagu will operate the business as a new standalone company which will develop, manufacture and sell flexographic products, including the Flexcel NX system, which will still be branded as Kodak products. However, it appears that Kodak will retain some intellectual property. Chris Payne, President of the Flexographic Packaging Division, explains: “The Kodak Flexo business will have ownership of, or a license to use, all Intellectual Property used by the business.  The new company will be able to fully operate on a long term basis given these Intellectual Property agreements.”

The name for the new company has yet to be released. Montagu is commited to retaining the current management structure. Thus Payne will lead the new company as CEO. Kodak will continue to provide various services and products, including Flexcel NX Imagers and laminators, as well as support services for the Flexcel hardware to customers. Payne says that it will be a seamless transition for customers, noting: “It is business as usual for Kodak Flexo customers as they will experience the same products, same people and the same trusted brand.”

There are several components to the deal, including the base purchase price of $340 million, which is subject to purchase price adjustments. Kodak is also set to receive potential earn-out payments of up to $35 million over the period through 2020 based on achievement by the business of agreed-upon performance metrics. Montagu will also pay Kodak $15 million when the deal closes as a payment in advance for any services that Kodak supplies.

Kodak has said that it will use the net proceeds from this sale to help reduce its outstanding debts. Kodak has said that it will try to refinance the remaining debt but has not ruled out selling off further assets.

Jeff Clarke, CEO, Kodak, described the sale as an “important turning point” for Kodak, adding: “The sale of the Flexographic Packaging Division unlocks value for shareholders and strengthens our financial position by providing a meaningful infusion of cash which allows us to reduce debt, improving the capital structure of the Company and enabling greater flexibility to invest in our growth engines.”

Realistically, that’s about the best spin that he could put on it but the sale is really about shoring up Kodak’s precarious financial position. The Flexographic Packaging Division has been an important source of revenue for Kodak so this sale means that it is now more dependent on generating growth in the Sonora offset plates and the Stream inkjet technology. But it’s not that long ago that Kodak looked into selling off its inkjet division because of the money that would be needed to develop the next generation UltraStream inkjet technology.

You can find further details on this sale at http://investor.kodak.com/investor-relations.

 

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