Starleaton Administration, potential buyer - an update by Andy McCourt

 Starleaton HQ moved to Artarmon, Sydney in 2023 after many years at Brookvale

The Print, Graphics and Signage industry remains in shock and mystified by the voluntary administration of Starleaton and associated companies from 19^th January this year, at a time when most suppliers appear to be doing well, in a sector that is growing faster than any other in the graphic arts. Andy McCourt updates the situation.

Business administrations can be dynamically-changing processes but one thing is for certain. Once appointed, the Administrator controls the company in question and is responsible for any debts incurred from that point. His or her job is to get the best possible outcome for creditors, staff entitlements and the business itself.

I spoke with Starleaton’s Administrator Andrew Blundell, following the first meeting of creditors and the announcement of the February 23rd second such meeting, scheduled for 15th March. Naturally, with investigations still on-going, Andrew Blundell of Cathro Partners was restricted in what he could discuss or reveal, but courteously responded to the obvious question “What caused Starleaton to enter administration?”

“There appears to have been long-term cash issues affected by increased competition, reduced profitability and industry contraction,” he said.

The industry contraction on the supply-side is apparent in the number of acquisitions made by international conglomerates, in recent years.

Supplier contraction over past 8 years

Spicers Limited, tangential to its acquisition of the listed PaperlinX business, was in turn acquired by Japanese paper giant Kokusai Pulp & Paper Co. Ltd., a company with over 5,000 employees and global sales revenues in excess of AUD$6.5 billion.

Ball & Doggett, itself a result of mergers between several paper companies including BJ Ball, KW Doggett and Conect Enterprises, was acquired by Japan Pulp and Paper Co., Ltd in 2017 and is a similar sized global paper company to KPP at over AUD$5.5 billion in total annual revenues.

The industry also saw German graphics and reflective film manufacturers ORAFOL buy its sub-distributors in Australia and set up a direct and highly successful subsidiary in 2017, headed up by experienced industry CEO Alex McClelland.

Distributor Graphic Art Mart was bought in 2015 by Dotmar Holdings, part of a plastics and metals conglomerate, Metal/Plastics Manufactures Limited, with revenues over AUD$5.5 billion. This company also owns Amari, established in March 2019, as an amalgamation of Amari Plastics, Australian Visual Solutions and Chief Media.

Similarly, Smartech is a company comprising acquisitions of Fordigraph, GBC, AE Hudsons, Neopost and Quadient and is globally headquartered in Texas, USA and also in Sydney, for Oceania, under Vince Nair.  Quiet Starleaton Warehouse at Artarmon HQ this week
 

Starleaton itself executed a buyout of DES Pty Ltd in 2016 and indeed, its ultimate holding company is still the vehicle that was set up for the acquisition, SDS Bidco Pty Ltd.

The question of what happened with Starleaton could be related to economy-of-scale when viewed in the light of all the other mergers and acquisitions but, the company was showing no signs of economic stress prior to its acquisition of DES.

The Covid pandemic era was actually beneficial for the signage industry, as both suppliers and manufacturers scrambled to fulfill demand for floor signage, social distancing signs and labelling, protective acrylic barriers, hand sanitisation stations, anti-microbial laminates and coatings and so on.

However, it is what it is, and the next few weeks are critical in the future of Starleaton, its past and present employees, creditors and customers.

Staff, Creditors and a potential Buyer

Andrew Blundell has fielded several inquiries to buy what remains of the Starleaton business. “We are currently helping one party conduct due diligence to buy the business in totality,” he said.

This is good news and there is certainly value in the brand, networks, systems, client list, agencies and inventories. However, some key staff have departed and found new employment opportunities, while others are assisting the Administrators in fulfilling orders. But what of staff entitlements?

Mr Blundell has confirmed that some have been supplied with redundancy notices to assist with claiming entitlements via the government FEG programme, but that claims can only be accepted if a company enters liquidation or bankruptcy. Unpaid superannuation is not covered under FEG and any claims for this need to be lodged with the Australian Tax Office.

Starleaton employed high quality staff, especially sales and service technicians and these have been quick to find jobs, at least ensuring continuity of cash flow to pay mortgages, living expenses and school fees for example.

While the final creditors’ report is a work-in-progress and due next Thursday on February 15th, followed by the second creditors’ meeting on Friday February 23rd; it is looking increasingly like a ‘cents in the dollar’ outcome unless significant assets can be realised, or a new owner accepts a portion of the liabilities.

As with all importer/distributors, there is a mixture of overseas and local creditors. Both have equal rights under Australian law and can participate in creditor meetings online, via MS Teams meetings.

Of concern are deposits paid by local customers prior to the administration, for equipment yet to be installed. This tends to be a grey area and Mr Blundell states that he is seeking legal advice in this regard. As administrator, he is obliged to collect as many due funds as possible for distribution to creditors, secured and unsecured, and identify any ‘preferential payments’ made in the six months prior to appointment but what is a deposit and contract to pay the balance if a piece of equipment remains undelivered? At present, it appears to be a vexed question.

The optimal outcome is that the aforementioned due diligence is successful and that a new owner emerges for Starleaton. Certainly, Cathro Partners will assure a propitious and lawful process to this, or any other, outcome.

We’ll keep you updated.

Any comments can be emailed to me, Andy McCourt on THIS LINK