On September 28, I posted an article titled ‘Bullish on Xerox's ACS deal'. It seems the return of liquidity, and comparatively easy credit standards in the global financial markets are driving and counter-driving top companies in each sector up their ante on mergers and acquisitions. Canon is the latest to join the party.
Canon (NYSE:CAJ) plans to buy Dutch copier and printer maker Océ NV for E730 million euros ($1.1 billion), in a challenge to rivals Ricoh (OTC:RICOY) and Xerox (NYSE:XRX) in the hunt for growth.
Struggling Océ has been a potential target
Never before has Océ experienced such extremely turbulent economic conditions as in 2008. And never before has the impact on its results been so severe. Océ generated E2 million in net profits on sales of E2,909 million (approximately $4,306.9 million) during the financial year (FY) ended November 2008. FY2008 Revenue and net profit saw a dip of 6.1% and 97.4% respectively over FY2007.
The global financial and economic crisis forced the company to make drastic changes in the plans and expectations that it had at the beginning of 2008 and to initiate actions without delay to protect its financial position and profitability.
Océ lacks the scale to compete with other industry players like Canon, Ricoh, and Xerox. These competitors are huge companies with high revenues, broad presence and diversified product portfolio. Océ revenue, market share and headcount pale in comparison to Canon, Ricoh, and Xerox. Océ had 2008 sales of E2.9 billion, one seventh of Canon's revenue from imaging products and printers. Canon had an 18.9% share in the global copier market in value terms in 2008, according to research firm Gartner, compared with 19.7% for Ricoh and 19.2% for Xerox.
Canon recorded approximately $39,713.4 million revenues and reported employees of 166,980, during the annual ending December 2008. Ricoh and Xerox recorded $22,199.9 million with employees of 83,456 for March ended 2008 and $17,608 million revenues with employees of 57,100 for December ended 2008, respectively. Huge scale enables these competitors to leverage on their facilities and technologies. Lack of scale limits Océ's ability to expand its operations and an easy target to be acquired by a bigger rival.
One way to seek cover was Océ join forces with a strong and bigger rival. Xerox having acquired ACS wouldn't have stomach to digest Océ. What will Océ offer to the potential acquirer?
Why is Océ attractive?
Océ is the largest European printer maker. It operates in two segments: Wide Format Printing Systems and Digital Document System.
