Content agency stablemate may offer new start for Polestar
Monday, July 28, 2014
The acquisition of River Group by Sun European Partners, owners of Polestar since April 2011, could be the start of a new chapter for the UK’s largest magazine printer.
Sun, Polestar and River are being deliberately coy on their plans other than to stress that Polestar and River will remain very much independent from one another but “will work closely together on specific brand and retail projects”.
In fact, aside from the headline claim that the acquisition will “create the UK’s biggest magazine and content group”, the rest of the official announcement does its level best to downplay the fact that this is an acquisition at all.
This deal is all about “partnership” and “creating relationships between symbiotic businesses”, we are told and certainly not about Polestar moving further up the value chain by buying a content business.
That said, Polestar chief executive Barry Hibbert and group finance director Peter Johnston have both been appointed directors to River Group, with no reciprocal appointments made, suggesting Polestar will certainly be the senior of the two partners.
Either way there is no downplaying the significance of the River deal as the first non-print acquisition by Polestar (or its owners) since Httprint in 2003 and it begs the question: could this mark the beginning of a St Ives-esque revolution for the Bedfordshire-headquartered print group?
Polestar and its various backers over the years – not least Investcorp, the private equity firm that created Polestar in 1998 via the £810m leveraged buy-out of BPC and Watmoughs – have been no strangers to spending.
However, discounting the significant sums that went on servicing debt, the vast majority of this money went on large capital projects, such as the £120m investment in the Sheffield gravure facility in 2004 and its 2014 sequel, the £50m web offset extension of the same site.
By comparison, Polestar spent £2.5m on acquiring BGP in November 2012, prior to which its last acquisition was the e-commerce business of Httprint (already part-owned by Investcorp) in 2003. In fact, Polestar has spent considerably more on closing businesses since 2000 than it has on acquiring them.
The River deal stands apart not just for being a rare acquisition (albeit not by Polestar itself) but also for being a content business rather than a print business. If we consider the aim to “work closely together on specific brand and retail projects” as the short-term plan, it begs the question: what is the long-term goal? It is unlikely that a limited “partnership” is the sum of Sun’s plans for Polestar and River. “Collaboration is just a polite way of saying two companies working together. But one will always hold the upper hand in terms of the relationship with the client,” says John Brown chief executive Andrew Hirsch. “If Polestar has bought River, I don’t see a problem with saying that. It’s not really a collaboration because [Polestar’s owner] has acquired either all or the majority of the shares in River.”
Importantly for Polestar, Hirsch doesn’t believe Polestar’s existing content agency clients will care that it has bought a rival agency. “We place work with UK printers all the time and what’s to stop a printer from saying to us, ‘We also do this work for another brand and do you want us to make the introduction?’
“Everyone will be judged on how they behave going forward, but I don’t think this deal creates a conflict that wasn’t there already,” he says.
“Most printers and content publishers have been around long enough to know where the line is and have got where they are by behaving honourably.”
So, what can we expect in the medium to long term from Polestar and River? The obvious benefit to Polestar, as Hibbert stated in the original announcement, will be to “greatly enhance our services and proposition to retailers and brands”. Another benefit to both parties would be if River were to place the bulk of its clients’ print with Polestar, getting the best possible price for itself and its clients while helping Polestar to “sweat the assets”, not least its two new 96pp Goss Sunday 5000 presses.
However, Polestar is adamant that it will “pitch like every other printer on the roster” leading one incredulous buyer to remark “anyone who believes that may be kidding themselves”. Hirsch is also of the opinion that the bulk of River’s print will ultimately find its way onto Polestar’s presses. “Why wouldn’t it?” he says. “I don’t necessarily see that as a bad thing; it’s sensible.”
Regardless, it is unlikely this was the prime driver for the deal, which one informed source believes has more to do with Sun’s exit plan – however far off that might be – than with filling presses. “They’re not going after the print work in particular. I would imagine they will bring the two closer together and attempt to create a ‘creative wrapper’ when it comes to spin Polestar again. When they do, the proposition for the business will be as a ‘multi-channel content producer’ and not just a printer,” says the source. “That’s the way I believe Sun will spin it. Barry and Peter are on the board of River already, so it seems pretty obvious they are in a reasonable driving seat.”
Opinion: More channels mean greater need for content-first policy
Clare Hill, managing director, CMA
Collaboration from a strategic point of view is happening all over the place. In the UK, content specialist agencies are collaborating with agencies that have specialties in other areas such as video, while similar partnerships are happening at agencies around the world.
I haven’t seen a partnership like this between a content specialist and a print specialist before, but it doesn’t surprise me because there is simply so much collaboration going on as a result of the explosion in channels and branded content. The real nub of the matter is that the growing number of channels means brands now need a content-first strategy, where the content is channel independent.
Whether you’re a specialist in content production or digital SEO, the lines are becoming more and more blurred due to the changes in brand content requirements and that’s driving collaboration across the industry. An example of this can be found in iProspect, Google’s number one SEO client, which has joined the CMA to develop their editorial content expertise, both through general education and through identifying and collaborating with specialist agencies that can fulfill the briefs that they receive.
While I don’t know the specifics of River Group’s partnership with Polestar there will clearly be a mutually beneficial relationship. A big part of River’s business is print-focused and while print has been under pressure for some time, there are some good examples of resurgence across the sector. One of the leading e-commerce businesses, Net-a-Porter, has reverted to print with the launch of Porter magazine, while at the other end of the spectrum Sports Direct is investing in its own in-store magazine.
Print is becoming increasingly important in the virtual world and while it clearly depends on where your business growth is coming from, I could imagine other agencies collaborating with or investing in production businesses if that’s what makes sense for them and their clients.
Reader reaction: How will the three firms involved in this deal benefit?
Simon Biltcliffe, chief executive, Webmart
“I think Polestar will be delighted to have somebody who understands and can share all the inner machinations of publishing on their side. Intellect-ually, emotionally and financially they’re connected but I don’t see any benefit to them getting closer organisationally, other than talent management. I think Sun will view this as a standalone investment; the common ownership is a happy coincidence rather than part of any grand plan to create a conglomerate – IPC tried that and it didn’t work.”
Andrew Hirsch, chief executive, John Brown Group
“I don’t think it’s that surprising. The content space is hot right now; everybody is talking about it and it’s one of the few areas where there are still quite a lot of independent businesses not owned by agency groups, where firms like St Ives and Polestar can make acquisitions. They are both spreading their risk by diversifying away from print, which is sensible. Polestar now has a content agency they can talk to brands about and River will see it as a competitive advantage being part of a print group.”
Paul Utting, chief executive, Wyndeham
“I think that it makes sense for printers to look up and down the supply chain if it adds value to the current offering. We are doing this with Rhapsody, where in addition to core services we are moving more into a technology offering focused on the automated creation of digital products. With regard to this particular deal, the one obvious issue for Polestar to address is to ensure that their current contract publisher clients don’t all of a sudden see them as a competitor!”