Pitney Bowes has sold a controlling interest in the entities representing a substantial majority of the global e-commerce (GEC) segment operating in the US to Hilco Commercial Industrial, an affiliate of management services company Hilco Global.
Hilco reportedly helps companies maximize the value of their assets and has worked with numerous organizations to wind down operations in an efficient, responsible manner.
The sale is to support a value-maximizing liquidation of certain GEC entities under the protection of Chapter 11 of the US Bankruptcy Code. The sale of the controlling interest occurred on August 8, 2024.
Pitney Bowes’ selling strategy
Pitney Bowes’ board of directors conducted a comprehensive strategic review, with the assistance of independent legal and financial advisors, determining that the exit path for GEC was in the best interests of the shareholders and other stakeholders.
The GEC segment struggled to achieve profitability over the past several years in the face of macroeconomic and industry headwinds. Pitney Bowes expects the exit path to substantially eliminate the losses associated with GEC, which were equal to approximately US$136m for the year ended December 31, 2023. Pitney Bowes has stated that it is committed to ensuring that this process is as seamless as possible for GEC employees, customers, partners and vendors.
Lance Rosenzweig, interim CEO and board member, commented, “When the company announced our four strategic priorities in late May 2024, we committed to working with speed and urgency to complete a comprehensive review of alternatives for GEC. We are pleased to have delivered on that commitment by concluding a productive review and identifying an exit path for GEC that provides for an orderly and efficient wind-down of the business, which will ultimately maximize value for Pitney Bowes shareholders. This path also gives us a clear runway to streamline the company and increase profitability across our core, cash-generating businesses: send tech, presort and financial services. In conjunction with our cost reduction efforts and progress on cash optimization, exiting GEC will also allow Pitney Bowes to make substantial progress in deleveraging our balance sheet. With these steps, we will be well positioned to deliver stronger results in 2025 and pursue enhanced value for shareholders in the years to come.”
The send tech and presort segments will continue to operate as normal, with no impact on customers, partners and vendors. Pitney Bowes Bank will be similarly unaffected by the GEC exit, continuing to conduct business as normal.
Overview of GEC exit path
To facilitate the liquidation and wind-down, Pitney Bowes has entered into amendments to the company’s credit agreement and note purchase agreement to allow for the GEC exit without triggering any events of default for Pitney Bowes, and also release the guarantees and liens provided by the GEC entities. Under Hilco’s ownership, two of the GEC entities have commenced voluntary cases under Chapter 11.
Pitney Bowes and GEC have signed a restructuring support agreement (RSA) to support GEC’s smooth transition into Chapter 11. In accordance with the RSA, a subsidiary of Pitney Bowes has committed to provide the GEC entities, subject to court approval, with approximately US$45m in debtor-in-possession (DIP) financing in the form of a delayed draw term loan. This DIP financing will support the efficient liquidation of the GEC entities through Chapter 11.
Pitney Bowes anticipates that it will incur one-time cash costs of approximately US$150m in connection with the GEC exit. The parties expect the wind-down process, which will require certain approvals from the bankruptcy court, to conclude in early 2025.