29 November 2009

Canon To Bid For Dutch Printer Maker Oce

Wall Street Journal

TOKYO—Canon Inc. said Monday that it plans to buy Dutch printer maker Océ NV for €730 million ($1.09 billion) in cash, as the Japanese office-machines maker pursues growth amid the global economic downturn. The proposed bid sent Océ shares sharply higher.

Canon aims to launch its tender offer of €8.60 a share between January and March. The bid, which is supported by Océ's management and supervisory board, would be a premium of 70% over Océ's closing share price on Friday, and more than double the average closing share price over the past 12 months.

In Amsterdam Monday, Océ shares rose 70% at close at €8.62. Canon shares fell 1.5% to close at 3,370 yen ($37.58) in Tokyo.

Canon said a takeover of Océ would help the Japanese company expand its product lineup and sales networks amid weak corporate spending. Océ "is a very attractive partner for our marriage," Tsuneji Uchida, Canon's president, said at a news conference. "We can complement each other."

During an Amsterdam news conference, Canon's chief financial officer and executive vice president, Toshizo Tanaka, said he couldn't quantify the synergies that would be achieved through the integration of Océ.

Canon expects Océ's high-end printing systems to complement Canon's midrange products. Océ offers strong sales networks in Europe and the U.S., while Canon has a solid foothold in Asia.

"Combined skills would give better results," said Anton H. Schaaf, Océ's chief technology and operations officer.

Fortis Bank Netherlands analyst Niels de Zwart said he doesn't expect Canon's offer to be topped by rival bidders. "Canon is paying a decent takeover premium," he said. Mr. De Zwart has a "buy" rating on Océ's stock.

Océ's business was hurt as the global downturn affected some of the company's key markets, such as construction and manufacturing. Océ has been reviewing its strategic options and in April said it wouldn't rule anything out—a move viewed by analysts as a sign that the company gave in to shareholder pressure to seek a buyer.

Bestinver Gestion SA, a holder of about 9.5% of Océ's outstanding shares, as well as Ducatus NV, ASR Nederland NV and ING AM Insurance Cos., holders of cumulative preference shares that carry about 19% of Océ's voting rights, have all said they will support the offer.

Some analysts see other potential bidders, but wonder if a rival offer will materialize. "Of the strategic options, we would see Hewlett-Packard Co. and Kyocera Corp. with sufficient financing options, while Ricoh Co. and Konica Minolta currently have high debt levels and relatively low earnings generation," SNS Securities analyst Maarten Altena said. He has a "hold" rating on Océ.

Canon's move to take over Océ is likely to be a long-term positive for Canon, said Tetsuya Wadaki, analyst at Nomura Securities. "Since Ricoh purchased Ikon, we've been assuming that Canon would take a strategic action eventually." In August, Ricoh purchased Ikon Office Solutions, a distributor of copiers and printers for Ricoh rival Canon.

Canon said it expects its net income for 2009 to decline to 110 billion yen from 309 billion yen a year earlier, as the company expects sales of its office equipment to shrink amid prolonged weak market conditions. Océ, which employs about 22,000 people, generated €2.9 billion in revenue in 2008, down 6.5% from €3.1 billion in 2007.

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