Pitney Bowes Announces Value-Maximizing Exit Path for Global Ecommerce Segment

Rhea-AI Summary

Pitney Bowes Inc. (NYSE: PBI) has announced a value-maximizing exit path for its Global Ecommerce (GEC) segment. The company has sold a controlling interest in the GEC entities to Hilco Commercial Industrial, which plans to lead an orderly wind-down of the business under Chapter 11 bankruptcy protection. This strategic move is expected to eliminate approximately $136 million in annual losses associated with GEC, allowing Pitney Bowes to focus on its core, cash-generating businesses: SendTech, Presort, and Financial Services.

The decision follows a comprehensive strategic review by the Board of Directors. The wind-down process is anticipated to conclude in early 2025, with Pitney Bowes providing up to $45 million in debtor-in-possession financing to support the liquidation. The company expects to incur one-time cash costs not exceeding $150 million in connection with the GEC exit.

Positive

• Elimination of ~$136 million in annual losses associated with the Global Ecommerce segment
• Increased focus on core, cash-generating businesses: SendTech, Presort, and Financial Services
• Expected progress in deleveraging the company's balance sheet
• Potential for stronger financial results in 2025 and beyond

Negative

• One-time cash costs up to $150 million for the GEC exit
• Provision of $45 million in debtor-in-possession financing for GEC liquidation
• Potential short-term disruption during the wind-down process

Insights

Financial Analyst

This is a significant strategic move for Pitney Bowes. The company is divesting its unprofitable Global Ecommerce (GEC) segment, which reported losses of $136 million in 2023. This decision should improve the company's financial health by eliminating a major source of losses.

The transaction involves selling a controlling interest in GEC to Hilco Commercial Industrial, which will lead a Chapter 11 bankruptcy process. Pitney Bowes is providing a $45 million DIP financing to support the liquidation. The company expects to incur one-time cash costs of up to $150 million for this exit.

This move allows Pitney Bowes to focus on its core, cash-generating businesses: SendTech, Presort and Financial Services. The company anticipates improved profitability and progress in deleveraging its balance sheet. Investors should watch for stronger financial results in 2025 and beyond as a result of this strategic realignment.

Corporate Strategy Expert

Pitney Bowes' decision to exit the Global Ecommerce segment represents a critical pivot in corporate strategy. By divesting a consistently underperforming business unit, the company is making a bold move to streamline operations and focus on its strengths.

This strategic realignment should lead to:

• Improved overall profitability
• Enhanced focus on core competencies
• Potential for increased shareholder value

The choice of a Chapter 11 process for GEC, managed by Hilco, suggests a structured and controlled exit that aims to maximize value recovery. This approach demonstrates prudent management of the divestiture process, balancing stakeholder interests while pursuing a cleaner break from the loss-making segment.

Restructuring Specialist

The restructuring approach chosen by Pitney Bowes for its GEC segment is well-structured and pragmatic. By selling a controlling interest to Hilco and supporting a Chapter 11 process, the company is leveraging expertise in asset liquidation while maintaining some control over the wind-down.

Key aspects of this restructuring include:

• Amendments to credit agreements to prevent default triggers
• $45 million DIP financing to support an orderly liquidation
• Expected completion by early 2025

This approach should help mitigate potential liabilities and maximize asset recovery. The $150 million estimated cash cost for the exit seems reasonable given the scale of the operation being wound down. Overall, this restructuring plan appears designed to minimize disruption to Pitney Bowes' ongoing operations while efficiently exiting the unprofitable segment.

Company Sells Controlling Interest in Global Ecommerce Entities to Hilco Commercial Industrial, Which Intends to Lead Orderly and Expeditious Wind-Down of Global Ecommerce Business

Transaction Paves Way for Company to Eliminate ~$136 Million in Annual Losses and Fully Focus on Core, Cash-Generating Businesses

STAMFORD, Conn.--(BUSINESS WIRE)-- Pitney Bowes Inc. (NYSE: PBI) (“Pitney Bowes” or the “Company”), a global shipping and mailing company that provides technology, logistics and financial services, today announced that it has sold a controlling interest in the entities representing a substantial majority of the Global Ecommerce (“GEC”) segment (the “GEC Entities”) operating in the U.S. to Hilco Commercial Industrial, an affiliate of Hilco Global (“Hilco”), to support a value-maximizing liquidation of certain of the GEC Entities under the protection of Chapter 11 of the U.S. Bankruptcy Code. This sale of the controlling interest occurred on August 8, 2024. Hilco is a recognized leader in helping companies maximize the value of their assets and has worked with numerous organizations to wind-down operations in an efficient, responsible manner.

Pitney Bowes’ Board of Directors (the “Board”) conducted a comprehensive strategic review, with the assistance of independent legal and financial advisors, prior to ultimately determining that this exit path for GEC is in the best interests of both the Company’s shareholders and other stakeholders. Notably, the GEC segment had been struggling to achieve profitability over the past several years in the face of macroeconomic and industry headwinds. The Company expects this exit path to eliminate substantially all of the losses associated with GEC, which were equal to approximately $136 million for the year ended December 31, 2023. Pitney Bowes is committed to ensuring that this process is as seamless as possible for GEC employees, customers, partners and vendors.

Lance Rosenzweig, Interim Chief Executive Officer and a member of the Board, commented:

“When the Company announced our four strategic priorities in late May, 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: SendTech, 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 Company’s SendTech and Presort segments will continue to operate in the normal course, and customers, partners and vendors should not expect any impact. Additionally, the Pitney Bowes Bank will not be affected by the GEC exit and will also continue to conduct business in ordinary course.

Overview of GEC Exit Path

Key details associated with the liquidation and wind-down, which were approved by Pitney Bowes’ Board and GEC’s independent governing body, as applicable, are as follows:

• 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 today commenced voluntary cases under Chapter 11 of the U.S. Bankruptcy Code.
• Pitney Bowes and GEC have signed a restructuring support agreement (“RSA”) to facilitate 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, an approximately $45 million 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 the Chapter 11 cases.
• Pitney Bowes anticipates that it will incur one-time cash costs not to exceed approximately $150 million in connection with the GEC exit.
• The parties expect that the wind-down process, which will require certain approvals from the bankruptcy court, will conclude in early 2025.

Additional information is available at www.DRF-Updates.com and https://cases.stretto.com/DRFLogistics.

Advisors

BRG is acting as restructuring advisor, Vinson & Elkins LLP is acting as legal advisor and Longacre Square Partners LLC is acting as strategic and communications advisor to Pitney Bowes. Weil, Gotshal & Manges LLP is acting as legal advisor, Portage Point Partners is acting as financial advisor and Hilco Commercial Industrial and its affiliates are acting as wind-down consultants to the GEC subsidiaries.

About Pitney Bowes

Pitney Bowes (NYSE: PBI) is a global shipping and mailing company that provides technology, logistics and financial services to more than 90 percent of the Fortune 500. Small business, retail, enterprise and government clients around the world rely on Pitney Bowes to remove the complexity of sending mail and parcels. For additional information, visit: www.pitneybowes.com

Forward-Looking Statements

This document contains “forward-looking statements” about the Company’s expected or potential future business and financial performance. Forward-looking statements include, but are not limited to, statements about future revenue and earnings guidance, future events or conditions, and expected cost savings, elimination of future losses, and anticipated deleveraging in connection with Pitney Bowes’ announced strategic initiatives. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those projected. Factors which could cause future financial performance to differ materially from expectations include, without limitation, declining physical mail volumes; changes in postal regulations or the operations and financial health of posts in the U.S. or other major markets or changes to the broader postal or shipping markets; the potential adverse effects of the GEC exit and wind-down and related transactions on the Company’s operations, management and employees and the risks associated with operating the business during the restructuring process and exit from the GEC business; risks and uncertainties associated with the GEC exit and wind-down and related transactions, including the ability to achieve the anticipated benefits therefrom; the ability to successfully implement the Company’s 2024 worldwide cost reduction initiative, the Company’s cost rationalization and optimization initiatives and to achieve expected cost reductions and improved efficiencies in connection therewith; the loss of some of Pitney Bowes’ larger clients in the Presort Services segments; the loss of, or significant changes to, United States Postal Service (USPS) commercial programs, or the Company’s contractual relationships with the USPS or their performance under those contracts; the impacts of higher interest rates and the potential for future interest rate increases on Pitney Bowes’ cost of debt; and other factors as more fully outlined in the Company's 2023 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission during 2024. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information, events or developments.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808352228/en/

Chapter 11 Claims Agent:

Stretto

DRFInquiries@stretto.com

Toll-Free Case Hotline Number: (855) 314-0664

International Case Hotline Number: (714) 716-1968

https://cases.stretto.com/DRFLogistics



Media:

Longacre Square Partners

Joe Germani / Jessica McDougall, 646-386-0091

jgermani@longacresquare.com / jmcdougall@longacresquare.com



Investor Relations:

Alex Brown

investorrelations@pb.com

Source: Pitney Bowes Inc.

FAQ

What is Pitney Bowes' plan for its Global Ecommerce segment?

Pitney Bowes (NYSE: PBI) has sold a controlling interest in its Global Ecommerce (GEC) entities to Hilco Commercial Industrial, which will lead an orderly wind-down of the business under Chapter 11 bankruptcy protection. This exit strategy aims to eliminate approximately $136 million in annual losses associated with GEC.

How will the GEC exit affect Pitney Bowes' financial performance?

The GEC exit is expected to eliminate about $136 million in annual losses, allowing Pitney Bowes (NYSE: PBI) to focus on its profitable core businesses. The company anticipates stronger financial results in 2025 and beyond, although it will incur one-time cash costs up to $150 million for the exit process.

When is the wind-down process for Pitney Bowes' GEC segment expected to conclude?

Pitney Bowes (NYSE: PBI) expects the wind-down process for its Global Ecommerce (GEC) segment to conclude in early 2025, subject to certain approvals from the bankruptcy court.

Will Pitney Bowes' other business segments be affected by the GEC exit?

No, Pitney Bowes (NYSE: PBI) has stated that its SendTech and Presort segments, as well as the Pitney Bowes Bank, will continue to operate in the normal course and should not be affected by the Global Ecommerce (GEC) segment exit.