On May 23rd, Pelikan announced that it was, “currently in negotiations with prospective strategic buyers to dispose substantially all its assets and business interest.” To this end, they hired KAF Investment Bank Berhad to advise and negotiate the terms of the transaction. The news took many by surprise and was met with quite a buzz in the industry. There has been a lot of speculation about who the prospective buyer might be. We now know that Holdham SAS, a holding company for the French based Hamelin stationery group, has entered into an agreement with Pelikan International Corporation Berhad (PICB) to acquire the Pelikan Group GMBH (PGG) which will allow PICB to exit its core stationery business. Many regulatory hurdles still have to be overcome in Germany and PICB’s shareholders will need to vote in order to approve the acquisition, but the deal is expected to proceed unimpeded with finalization anticipated for some time in the fourth quarter of this year, tentatively before the end of October. PICB also needs to carveout a number of its assets that are not included in the acquisition (e.g. Pelikan Procurement Sen Bhd, Pelikan Taiwan Co. Ltd., eCom Logistic GmbH, MOLKARI, and Kruezer Produktion + Vertrieb GmbH). The sale price has been reported at 136 million euros ($148.5 million) which Hamelin will pay in cash. The bulk of the proceeds are to be distributed to the company’s shareholders. In yesterday’s filing with Bursa Malaysia, Pelikan cited challenges with their distribution channels, production technology, and the global economy as the rationale for selling the brand which they’ve held onto since 2005. Wholesalers, Pelikan’s main customers in the past, have increasingly been replaced by more direct distribution channels, a change that has resulted in high complexity and increased margin pressures. At the end of the day, Pelikan felt that they lacked the resources necessary to continue to invest into the changes within those channels resulting in the company being less competitive in the global marketplace. Read on to learn just how the deal is expected to unfold.
The proposed transaction would see PICB sell 28% of its interest in PGG. Two subsidiaries of PICB, Pelikan Holdings AG (PHAG) and Molkari Vermietungsgesellschaft mbH & Co Objekt Falkensee KG, would sell 51.36% and 20.64% of their shares respectively. Under this deal, two additional subsidiaries currently under PHAG, Pelikan PBS-Produktiongesellschaft MBH (PPG) and Pelikan PBS-Produktion Verwaltungs-GMBH (PBS), would also be transferred to Holdham for a nominal fee of 1 euro ($1.09) each. Purchase of these entities nets Hamelin both the Pelikan and Herlitz brands of school and office products along with four production sites in Germany, Poland, Mexico, and Colombia. The sale would result in PICB becoming what is known as a “cash company,” a company listed on the stock exchange whose assets consist of 70% or more of cash due to it having disposed of all or most of its businesses. In addition to the cash value of the transaction, debt totaling 31.78 million euros (~$34.7 million) owed by PICB and PHAG will be assumed by Holdham SAS. The sale price along with the assignment of debt would result in an implied enterprise-value-to-EBITDA ratio (earnings before interest, tax, depreciation, and amortization) of about 9.63 times and an implied price-to-earnings (P/E) ratio of 26.8 times. Typically, EV/EBITDA values below 10 are seen as healthy. At the close of yesterday’s market, Pelikan’s share price was 85.5 sen (~$0.18), valuing the company at RM516.93 million (~$110.7 million). Hamelin plans to fund the acquisition through loans and existing cash on hand.
Pelikan’s stock price remained flat as of the close of the market yesterday but has shown significant growth since the end of last year – RM0.8550 (85.50 sen)
The 136 million euro sales price is equivalent to 695.44 million Malaysian Ringgits (RM), the currency of Malaysia. Pelikan intends to utilize RM139.72 million (~$29.9 million) for working capital and settlement of liabilities, RM40 million (~$8.6 million) for repayment of bank borrowings, and RM3 million (~$643 thousand) to cover the estimated expenses of the transaction. The remaining RM512.72 million (~$109.8 million) would be distributed within six months from the completion of the sale to shareholders via a special dividend and/or a capital repayment. The capital repayment is expected to be implemented through a reduction of existing share capital and would not result in the cancellation of shares. Any remaining proceeds would be distributed to shareholders on a pro-rata basis contingent on one of two scenarios. These would be if the group failed to submit a proposal to acquire a new core business to the Securities Commission within 12 months of becoming a cash company or if the group decided not to retain its listing on the Kuala Lumpur Stock Exchange. As part of their filing, Pelikan states; “Although the group has in recent years generated profits since 2015, the group is unable to declare any dividend out of operating profits because of the continuous high working capital requirement and new product development and reinvestments.” An extraordinary general meeting (EGM) will need to be convened for the company’s shareholders so that they may vote on the disposal and the proposed repayment. Shareholders holding at least 75% of the total issued shares must approve the proposals for the deal to proceed.
Holdham SAS is the holding company of the Hamelin Group, a French, family owned business. It was founded in Caen, France, in 1864 by Ernest Hamelin and has since become a market leader of school and office supply products. Their current market position aligns nicely with that of Pelikan who derived 44% of its sales from school supplies and 36% from office supplies in 2022. In case you’re wondering, the fine writing instruments division accounted for 7% of Pelikan’s 2022 sales. Since 53% of Pelikan’s 2022 revenue came from Germany, Hamelin will certainly strengthen its position in that market. Hamelin’s website boast 2,400 employees across 19 countries with a 400+ million euros turnover. Hamelin products are used in over 100 countries with local subsidiaries and operations in the UK, France, Spain, Italy, Switzerland, The Netherlands, Germany, Denmark, Poland, Czech Republic, Turkey, Tunisia, and Australia. Key brands that the Hamelin Group has obtained include Lecas, Favorit, Cambridge, Basildon Bond, Challenge, Three Candlesticks, Top 2000, Unilux, Banter, Linex, Elba, Hamelin, Scribzee, Enri, Conquérant, Landré, and Oxford. In response to yesterday’s news, the CEO of the Hamelin Group, Eric Joan (pictured above), released this statement; “We are thrilled about this agreement with PICB to acquire the Pelikan Group. Pelikan’s brands, product range and global distribution network fit perfectly with Hamelin’s industrial plan to become a global player in the school and office supplies markets. The synergies are considerable, and the growth potential is very significant for the Oxford and Pelikan brands worldwide.” The acquisition would see the company generate an annual revenue in excess of 600 million euros and employ more than 4,000 staff worldwide (assuming current levels of employment). While impressive, these figures will still lag behind those of one of their chief competitors, FILA.
The wait is over. Pelikan, a 185 year old German company, will see its ownership transition from Malaysia to France. The acquisition certainly seems like a good fit for the two brands. While it is clear that Hamelin will gain significant traction in the school and office supply sectors, one of its core strengths, it remains unclear what their intentions might be for the fine writing instruments division or how adept they might be at shepherding the brand. Only time will tell. We must hope that the French are willing to breathe some new life into such a storied brand and restore some of the luster that has worn in recent years. Certainly, an influx of cash and new ideas could do just that. As for PICB, I’m sure that the shareholders will be pleased with the outcome after years of loss and the lack of dividends. Hopefully, in the end, the true winners of this transaction will be the dedicated and loyal fans of the brand.
References
- Braithwaite, Andy. “Hamelin Acquires Pelikan.” OPI. June 30, 2023. Last accessed 6/30/23.
- Corporate Announcements to Bursa Malaysia Securities Bhd. General Announcements. Pelikan International Corporation Berhad. Last accessed 5/27/23.
- FMT Business. “Pelikan to sell stationery unit for RM695mil to France’s Holdham.” FMT. June 30, 2023. Last accessed 6/30/23.
- The Hamelin Group. Last accessed 6/30/23.
- NST Business. “Pelikan International to sell stationery business, payout capital and special dividend.” New Straits Times. June 29, 2023. Last accessed 6/30/23.
- Wyn, Lam Jian. “Pelikan announces sale of stationery biz for RM695 mil, distribution of proceeds to shareholders.” The Edge Malaysia. June 30, 2023. Last accessed 6/30/23.
We will see. I don’t like to see brands tossed around as happens now. I’m skeptical of the sale, but we will see if they promote the brand or strip mine it.
At least I have my Stresemann.
I’m happy that it fell to a family owned French company. That gives me some hope that strip mining wasn’t the intention behind the purchase.
Well, at least it’s a European company and French ones specifically seldom resort to quality fade and asset-stripping tactics beloved of US private equity, more so since Hamelin is an actual industrial firm, not a financial shell company. Most of their brands are low-end, however, other than Linex, basically supermarket low-cost alternatives to higher-end ones like Clairefontaine.
I couldn’t agree more. I certainly think that there was a lot worse out there whose hands the brand might have fallen into. The purchase by the French gives me some reason for optimism. While they are lower end brands, Pelikan might be their foray into the luxury writing world. Very excited and apprehensive to see where this goes.
Maybe the new company will bring back the translucent barrel M800…
The Pied Pelikan Piper of Hamelin.
I’m hopeful that they will 1) see continued value in maintaining the fine writing instruments division and 2) that we’ll have at least some new ideas injected into the mix.
I really hope the fine writing division is not impacted in any way and that the high quality is maintained. But, I consider myself very fortunate to have been able to acquire many exceptional pens over the years and I am happy with my collection as it stands. New releases, though, are always welcome, so here’s hoping that continues. Thanks, Joshua, for keeping us all abreast of all things Pelikan. Your contributions are all very much appreciated greatly.
Thank you for the kind words. I too hope the same. Even if the line were to die today, that last 90+ years have left plenty of fodder for me to continue my work.
It has been obvious for a few years that Pelikan was in financial distress. We’ve seen the quality coming down and the prices becoming uncompetitive. So this must be good news for the employees. Pelikan’s future ought to be more secure in the hands of a more successful stationery group with a long-term view on this business than it would have been if they had sold out to venture capital.
But I still wouldn’t assume Hamelin’s vision for the Pelikan brand is the same as ours, or that continuing Pelikan’s high-end fountain pen line is a priority for them. It’s hard to predict Hamelin’s attitude toward this small part of the Pelikan business – I guess it isn’t profitable, but it does enhance the Pelikan brand image.
You aren’t wrong. The writing has been on the wall and I’m sure the company has felt the majority shareholders breathing down their neck waiting from some return on their investment. We absolutely cannot assume that Hamelin will share our vision but we can hope.
Thanks for keeping us posted, Joshua. I don’t have fond memories of watching the long-established company I worked for cut into pieces and sold to new owners. I hope the Pelikan employees benefit from the situation (especially, of course, the fine writing instruments division!).
It seems like Pelikan in its current form was doomed to continue its deteriorating orbit so, while I don’t love to see the brand once again broken up, I can only hope that it is for the best. A fresh faced new vision with a little more liquidity might be just what we need. The fact that Hamelin is family owned and not some corporate overlord also gives me some good vibes.
Great article. Thank you!
I’ve always liked that even the more fancy Pelikan fountain pens have a deep connection to Schulfüller (school pens) and office supplies, so I feel like this is a return to form!
Thanks! I too am cautiously optimistic.
This looks bad for Pelikan fans
How so? I’ll concede that there is a lot of uncertainty ahead but I don’t think anything here is definitively “doom & gloom.” I think there could have been a lot worse stewards into whose hands the brand might have fallen. This could be the end of the line for Pelikan fans but only time will tell.
Usually when a company is bought out a lot of bad things happen that affect the consumer.
You are right. The ones who stand to gain the most are the shareholders. That said, not all acquisitions have to be bad for the consumer, though that certainly may turn out to be the case. I guess it’s just too soon to know right now how this is all going to turn out. I sincerely do hope that you are wrong though.
Joshua
An excellent detailed report on the sale of Pelikan. I hope its better managed and the quality stays the same in new hands………. which is not always what we wish.
Thanks Francis. That is what we all hope for, I’m sure.
1. The high-low quality of the acquirer and target suggests they’re thinking of the acquisition as a strategic complement. That’s good.
2. An all-cash purchase suggests a strong buyer. That’s good.
3. Simplifying the corporate structure has to induce efficiencies. That’s good.
4. The 7% revenue share for fine writing is interesting. It puts a $10-15m valuation on the fine writing division. To my mind, that’s probably something that would be sold, rather than shut down. Good for us.
5. And, that’s a mighty impressive financial analysis for an MD! Good for you!
Thanks for your analysis William. I’m happy to read that you’re seeing positives here. My financial analysis only comes from hours of research. This stuff is admittedly beyond my skillset though I do find it fascinating.
Well… of all of the potential outcomes I like this one… French and family run company in the same general line of business. Let’s hope they view fine writing instruments as a big plus to their current offerings.
I couldn’t agree more. I was dreading who might step in as a buyer and, perhaps naively, I feel a bit better about this news than I was expecting.
This may seem trivial in light of this momentous news…but I wonder if we’ll get an M2XX Rose Quartz fountain pen? Probably no way to know, but I’ll bet they never even started on it because of the impending changes. I’m sure things have been very unsettled there for quite a while.
I am very cautiously hopeful that they may employ some designers who will create a little more colorful designs. Not to get crazy or anything; I still love all the traditional colors. But IMHO, a little color variety is long overdue. I’d love to see them do something fresh and creative with their most reasonably-priced models, like the M2XX and M4XX. And an overall, fair reduction in prices would go a long way in regaining lost customer goodwill. I guess it’ll be a while before we can see what direction they take on their quality writing instruments. I guess I’m a little tired of waiting on Pelikan…to do anything. I won’t be holding my breath.
Great reporting and financial analysis, Joshua. It was extremely thorough and way over my pay grade.
Over mine too Debi, but a lot go Googling got me through it. All supposition but I think that the pipeline for new releases is an established one that is likely pretty fixed. Future releases have likely been designed and planned out for a while now. I don’t see the current news halting anything, at least for the moment, especially since the sale won’t conclude until the end of this year. Pelikan doesn’t want to miss out on the revenue in-between now and then so I doubt they’ll call things off. I expect that we’ll see business mostly as usual until the transaction is completed and then we’ll see where they go from there.
Well, that makes sense. Sounds kind of reassuring. Maybe I will get my pink pen after all! I just won’t hold my breath.
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At least it wasn’t sold off to a Chinese company like Omas.
I too am happy to see it to return to at least a European based company. One of my fears has been that production will be moved out of Germany. I see that as less likely in this scenario though all bets are off until we see what the new owner’s intentions are.
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Thank you for the detailed reporting! From a product portfolio perspective, the European school / office supply market is certainly the main field of interest for Hamelin. They come from the paper / notebooks / folders / exercise books side and the writing instruments sector is mainly owned by Stabilo, Pelikan / Herlitz, Lamy, and Faber-Castell. So with Pelikan / Herlitz, they are getting one of the heavyweights in writing instruments and this seems to be a good fit for their paper-focused portfolio. Hamelin’s Oxford brand is actually ubiquitous here in Germany and other European countries, and their paper is specifically marketed as fountain pen-friendly. It is actually quite good and my main notebook paper for work. Their Scribzee app works very well to digitize notebooks. It’s closer to Rhodia than Clairefontaine in my opinion (a bit more grain on the surface), but it is nevertheeless great to have good-quality notebooks for fountain pen users in every grocery store and pharmacy across Germany. Many of Hamelin’s products are actually made in Germany, so while there might certainly be significant changes, at least they are not all about moving production somewhere else. What that means for the fine writing portfolio is a different question, of course.
Great to hear that Oxford is fountain pen friendly. I do hope that they preserve the Pelikan brand’s integrity, even going so far as to restore some lost credibility. If it goes the way of so many other once prominent brands after they’ve been bought out, it will truly be a sad day in the industry.
I hope that Pelikan will reconsider some of their fine writing design decisions once they are in a more stable financial position. They pretty much lost me as a costumer with the move to non-transparent barrels and the explanation they gave, and I am a huge Pelikan fan! I have enough pens and don’t really need to buy any more, but I hope for the company’s sake that it retains the most original aspects of its brand history.
They lost a lot of customers I believe. I truly think that they undervalued the benefit of that brilliantly translucent barrel and chose economic considerations over the desires/wants of the consumer. Its a compromise that stabs at the very heart of the brand, nearly the equivalent of Montblanc ditching its white star logo.
Thanks to Joshua for keeping us informed. Like others, I hope that this purchase will benefit the fine writing department of Pelikan. While I have not been fortunate enough to obtain a Pelikan pen any more expensive than the 200 category, I nevertheless have loved the Pelikan pens, and hope the higher end pens will be there if I’m ever able to afford one of their top tiered pens.
You’re doing well for yourself if you have an M200. They are great pens, not as flashy as the Souveráns but they get the job done.
It is the right time for this change. Current management milked the product line for all they could get out of the “fine writing instrument” end of the business, and I think there is big unrealized potential in the rest of the brand. This will probably come out well in the long term as long as respect is maintaitned for the Pelikan name. It could have been much worse – a China takeover for example. Change can be good. I am positive for the future.
I agree that PICB was trying to run as lean as possible in order to be profitable, almostly certainly so they could reap the rewards as shareholders. It clearly started to show so I’m glad someone else is getting in there and I’m optimistic for the future.