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ODS's Dassow plant goes under the hammer

Interested buyers for ODS’s DVD manufacturing plant at Dassow, Germany, had until yesterday to submit their bids. There are four serious "finance and strategic investors" in the running, according to the insolvency administrator, who will start the process of selecting the best suitor on Wednesday.

The administrator notes that "tough market conditions and the amount of equipment involved" is the reason why the sale of the plant attracted few interested parties.

News that all was not going according to plan at the Dassow DVD manufacturing plant, divested from the ODS Group in the wake of insolvency procedures and renamed Vermoegensgesellschaft DVD Dassow GmbH through a convoluted retructuring last October, emerged when dozens of its replication lines were offered for sale through second-hand equipment broker Add-Y-Pac, based in Yverdon, Switzerland.

The sale of nearly 30 Hamatech-Steag lines – ranging in price from €80,000 to €130,000 (€800,000 when new) – reportedly came as a surprise to both the ministry of finance at Schwerin and the court-appointed Brinkmann & Partner administrator when the equipment sale was advertised early last week.

A spokesperson for the ministry of economy had previously insisted "No equipment will be sold", to avoid the cessation of activities and the lay-off of all employees, thus making it possible to attract potential buyers.

While ODS says the replication lines being sold are old ones that needed to be disposed, DVD Intelligence understands that the finance company leasing this equipment, no longer paid, wanted to recover what could be salvaged of their asset should the plant collapses.

Three-quarters of the €24 million worth of 'moveable asset'‘ – 115 replications lines at Dassow and 15 lines at the ODS plant in Poland – are owned by 18 finance companies. ODS owns the rest, worth €6 million. Two years ago, in order to raise capital to service payments to suppliers, ODS sold some of its equipment to finance companies who leased it back.

Before Christmas, the plant operated only at 75% capacity because of shortage of material due to suppliers demanding cash on delivery. Not able to service their clients in house, ODS terminated exclusivity clauses, releasing clients to source products and services elsewhere.

That is what Universal Pictures International, their biggest client, whose pan-European DVD manufacturing and distribution business ODS acquired from Technicolor in November 2006, did. DVD Intelligence learned last November that a French replicator had received a "sudden and unexpected" multi-million DVD unit order from Universal. Four other replication companies services ODS clients.

While the Dassow plant kept operating despite the insolvency procedure, in Poland, where the law is different, the plant had to stop operating on 21 December, leaving most of its 750 staff in limbo. ODS told us that an administrator will be named shortly, and work there should resume within 2-3 weeks.

According to the administrator’s statement released on Friday, the Schwerin finance ministry and the work council are anxious to ensure that the ODS buyer will keep at least 50% of the workforce, including 50 junior staff completing their apprenticeship. Interviewing of staff to be retained has already begun.

Earlier this year, the ODS Group divested its ODS Optical Disc Service GmbH (the Dassow factory), renaming it Vermoegensgesellschaft DVD Dassow GmbH (VDD). ODS says it instigated this divestiture to protect the other activities of the group from adverse consequences resulting from the various claims of grants and subsidy fraud as well as legal battles related to licensing and royalties issues.

ODS said it was eventually cleared of any wrongdoing, and the finance ministry proceeded to repay taxes withheld which the company said was a primary reason for the plant insolvency problems.

The company underlined that the insolvency – and thus sale – relates only to VDD "which is not part of the new ODS Business Services Group."

Co-owner of the ODS Group with a German bank, Wilhelm F Mittrich (pictured) stepped down as Chief Executive Officer, replaced by Kevin Martin. Alfred Fetouhi is the new Chief Operating Officer and Jester Schertiger, the new Sales and Marketing Director Europe.

While ODS is keen to insist that it is the manufacturing plant only which is for sale, in practice, whoever acquires the production facilities is "highly likely" to acquires the distribution and logistics operations, that is, the entire ODS Group. "It does not make much sense to own the manufacturing of products without controlling their distribution," a high-level ODS executive told DVD Intelligence.

Therefore, the marketplace might brace itself for a change of ownership – and name – of Europe’s largest optical disc replicator. The ODS Group boasts the largest CD capacity in Europe with 1.7m units per day and the third largest DVD capacity with 1.25m discs per day. The group operates in the United Kingdom, France, the Netherlands, Italy, Spain, Portugal, Poland, Hungary, Denmark, Sweden and Romania. The number of employees had grown from 1,500 to almost 3,000 last year alone. The company started with a staff of 40 back in 1998. 2007 turnover was expected to exceed €300 million. It was €195 million in 2006.

"Industry insiders are not surprised by the collapse of the company," says the Ostseezeitung newspaper. ODS climbed to its position as the leading optical disc manufacturer thanks to subsidies from the 'Mecklenburg-Vorpommern' province, totalling €70 million. And a large number of the jobs were underwritten by the local employment agency. "The subsidies helped the company director Wilhelm Mittrich to throw DVD and CD products at dumping prices on the market. It was a major distortion of competition," writes Ostseezeitung.

Wilhelm Mittrich was not available for comments. He currently lives in Bali. DVD Intelligence was told that, to a reporter asking him by email if or when he intends to return to Germany, Mittrich emailed back a smiley!

Story filed 20.01.08

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