UK pensioners buy Kodak photo business

Eastman Kodak Company has traded what’s left of its photography and document scanning businesses to the UK Kodak Pension Plan (KPP), for US$650 million in ‘cash and non-cash consideration’ and the waiving of the US$2.8 billion debt the pension fund is claiming as EKC’s largest – but unsecured – creditor.

Kodak film, silver halide paper and retail printing businesses are being transferred to Kodak Ltd (UK) employees and pensioners.

Kodak film, silver halide paper and retail printing businesses are being transferred to Kodak Ltd (UK) employees and pensioners.

The pension scheme itself will put up $350m to acquire the businesses. The extra $300m ‘non cash consideration’ is in effect a contribution from Eastman Kodak to the scheme, in exchange for the KPP trustees foregoing their claim in Eastman Kodak’s bankruptcy proceedings.

It could thus be argued that KPP has accepted a bit more than 10 cents in the dollar (the US$300 million) on the US$2.8 billion debt, and now owns a highly illiquid, geographically dispersed set of assets, some of which are heading towards obsolesence. As such it appears to be a brilliant outcome for Eastman Kodak, less clearly positive for the UK employees and pensioners.

A previous deal to sell the document scanning business to Brother for around $210 million will be superseded provided the KPP deal gets approval from the Bankruptcy Court.

The Kodak Personalized Imaging business unit (its photo business) consists of silver halide paper (manufactured in Harrow, UK) thermal photo paper (Denver, Colarado), film (Rochester, NY), kiosks, and some theme park photography installations.

Motion picture film stays with Eastman Kodak.

The UK KPP has liabilities of over $1 billion. Had it not negotiated this deal, the alternative was likely to have been folding the failing plan into the UK Pension Protection Fund (PPF) – the lifeboat for failed pension schemes in the US.

KPP has nearly 15,000 members, including 8,610 who are already claiming their pensions. Under the settlement, the current pension scheme is to go to the PPF, and members offered the choice of joining the new scheme or sticking with the old plan under PPF administration.

The new Kodak Pension Plan will have lower benefits than the pre-bankruptcy scheme, but KPP’s chairman, Steven Ross said that these will be higher than the PPF will offer.

‘In one comprehensive transaction, Kodak will realise its previously-announced intention to divest its Personalized Imaging and Document Imaging businesses and settle its largest legacy liability,’ said Antonio M. Perez, Kodak chairman and CEO.

‘Overall, this settlement gives the KPP members greatly improved future prospects whilst being good for Kodak’s employees, its creditors and for UK businesses,’ said Steven Ross.

‘The businesses that we are acquiring will deliver long-term cash flows to support the Plan’s obligations. The financial stability that KPP will provide for the Personalized Imaging and Document Imaging businesses will be beneficial to those businesses’ employees, customers and partners.’

(I don’t think we’ve heard the last of this one! KS)

Letter from Laura Quatela, Worldwide President, Personalised Imaging, EKC to Kodak Express members:

Quatela_Laura2_smallDear Kodak Express Members,

It’s an exciting day for the Personalized Imaging (PI) Business within Kodak. Today we announced that Kodak has entered into a comprehensive settlement with the Kodak Pension Plan (KPP), the pension plan for our UK employees, to spin-off our PI and Document Imaging businesses. Those of us in this business couldn’t be more pleased with our new owner, which recognizes our value and is focused on our growth and success.

Our Retail Systems Solutions (RSS), Paper & Output Systems (P&OS), Film Capture and Event Imaging Solutions (EIS) businesses are included in the spin-off. As most of you know, RSS is the worldwide leader in retail print solutions with a global footprint of 105,000 Kodak Picture Kiosks; P&OS includes the broadest portfolio of traditional photographic paper, chemistry and workflow products; Film Capture offers award-winning still camera films for consumers and professionals; and EIS provides souvenir photo products and solutions at theme parks and other venues. The spin-off of the PI Business also includes the transfer of our thermal and paper manufacturing plants and provides the associated Intellectual Property necessary for our innovation.

In our new company, we will continue to trade under the Kodak brand, and will continue to have access to the critical trademarks and sub-brands necessary to maintain the continuity of our ongoing business. This includes the associated Kodak Express brand. The company name, to be announced before closing, will proudly include the word that George Eastman famously devised, ‘Kodak’.

We look forward to continuing to work with you to drive our consumer-imaging heritage, which many of you have helped to shape. KPP shares our excitement about our business and the future opportunities inherent in it. They put strong value on maintaining the loyalty and support that our customers have long demonstrated, particularly during our sale process.

Since Kodak first announced the intention to divest itself from the PI Business, our team has worked to build an exciting vision of our future. We have developed a more focused organisation, with decision-making closer to the customer as well as a world-wide product and partner development team optimised for growth and faster time to market. The team we have in place will move forward with the new company, and we will continue to drive improved innovation and customer satisfaction in the new organisation. Armed with the best imaging technology, a beloved brand and a strong global installed base, fuelled by our new focus and culture, and supported by a new owner that is prepared to invest in our growth plans, we are tremendously optimistic about our future and the future of our partners in imaging.

We expect the deal to close by the end of Q3 2013. We look forward to serving your business needs today and for many years to come. We will also keep you informed as the transaction progresses. We are excited to embark on this new chapter and thank you for your ongoing support of our brand, our products and our services.

Regards,
Laura Quatela

 


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