Heidelberg is negotiating a stronger partnership with Chinese manufacturer Masterwork as part of the shake up of its finishing assets that has led to the decision to cease manufacture of saddlestitchers and perfect binders and its carton gluers and platens.
Under the terms of the outline deal, Masterwork is to pay €25 million for the assets of the carton gluers and platens business and will produce these machines on behalf of Heidelberg. There is the opportunity to sell its own machinery via Heidelberg OEM agreements including its unique combined foil blocker and die cutting platen. Heidelberg has already sources some of its packaging finishing products from Taiwan under an existing OEM deal. It is not clear if this is affected.
Heidelberg is also selling its saddlesticher and perfect binding business to rival Muller Martini, but no figures are being disclosed. The Swiss company will take on the service and support for the ST range of stitchers and Eurobind perfect binders. It will not be manufacturing the machines, but will be able to supply parts. Nor is it taking on Heidelberg staff associated with these product lines.
Heidelberg will not be closing down the folder business, though there will be reorganisation of the Ludwigsburg plant where these are made. It will also continue to sell Polar guillotines and related equipment. The Leipzig plant, employing around 250 and with a long tradition of building saddle stitching equipment, is to be closed. There are no arrangements for Muller Martini to take on Heidelberg staff. In all Heidelberg will shed 650 worldwide and will save €30 million a year, the impact beginning in the next financial year. The move is part of the company’s stated target of achieving an Ebitda margin of at least 8% by the end of the 2016 financial year.
“The competitiveness of post press product product lines at Heidelberg was limited, so these activities are being placed on an entirely new footing,” says Heidelberg CEO Gerold Linzbach. He had explained how Heidelberg would take action to ensure the financial targets are met, closing or selling under-performing business segments. The costs of manufacture in Germany have become too high to sustain this business under new market conditions, the company explains.
Questions remain open about whether Muller Martini will link the Heidelberg machines to its own Connect workflow and Remote diagnosis and service systems. Transition teams are being set up to handle training of service engineers and the transfer process which is expected to be complete by the end of the year.
“We will do everything we can to transfer the know-how efficiently to our organisation because we want to provide Heidelberg customers with reliable service support smoothly and seamlessly,” Muller Martini CEO Bruno Muller says.
The deal with Muller Martini is self contained compared to that with Masterwork, where the announcement that the Chinese business will supply Heidelberg with die cutting platens and carton gluers, is only part of a much wider ranging negotiation which touches on deeper collaboration. Heidelberg will become a sales channel for Masterwork products and to service and support Masterwork’s machines.
The companies have signed a letter of intent, to be concluded in 90 days, which points to a “long-term strategic partnership” between the two companies. This would follow Heidelberg’s relationships with Ricoh and Fujifilm. If the proposed deal with Heidelberg is concluded, Masterwork will set up a new factory to produce “high end Heidelberg presses and components as well as components for its own high end machines”. Heidelberg may take a minority stake in the Chinese business at an unspecified date. Currently Heidelberg’s factory in Qingpu (set up originally to produce folders) produces older style Classic B1 Speedmasters, produces 50% of the presses Heidelberg sells in China and is a profitable enterprise.
Masterwork is currently the leading Chinese manufacturer of graphic arts equipment with sales around $850 million a year, operating from a new factory in Tianjin which is able to produce more than a machine a day. Quality is driven by supplying Chinese carton printers, specifically for cigarette cartons which require extensive foil blocking. European customers include leading cosmetics packing producer Autajon in France, Beamglow and Blockfoil in the UK. It sees the opportunity with Heidelberg as a way to grow its sales in the developed world where Bobst is the dominant player.
To find out more about Masterwork, read more.
The market conditions that forced Heidelberg’s hand Read more.
“The competitiveness of post press product product lines at Heidelberg was limited, so these activities are being placed on an entirely new footing,” says Heidelberg CEO Gerold Linzbach. He had explained how Heidelberg would take action to ensure the financial targets are met, closing or selling under-performing business segments. The costs of manufacture in Germany have become too high to sustain this business under new market conditions, the company explains.
