Wednesday, Ikon Office Solutions Inc. (IKN), a U.S-based provider of document management systems and services, announced that it has agreed to be acquired by Japan's Ricoh Company, Ltd., a digital office solutions provider, for $17.25 per share, or about $1.6 billion in cash.
The consideration of $17.25 per share represents a 33% premium to Ikon's average stock price for the last two months and about 11% premium to Ikon's closing price on August 26.
Ricoh, in a statement said the acquisition is part of its integrated global growth strategy and will strengthen its business infrastructure in the U.S., Canada and Europe by combining with Ikon's strong sales and service network. Ricoh would also gain access to Ikon's customer base, which includes major account customers and government and public sectors in the U.S.
Ricoh said it would finance the deal with a mix of its own and external funding. This deal is considered to be Ricoh's largest acquisition to date. Last year, Ricoh paid $725 million to buy International Business Machines Corp.'s (IBM) digital commercial printer business.
With this acquisition, Ricoh will significantly enhance its global presence as Ikon supplies and services a wide range of office equipment, such as multi-function printers, fax machines and printers, in the U.S., Canada and the Western European markets.
Ricoh is also one of the world's leading manufacturers of high quality multifunction products, printers, fax machines and related supplies. Headquartered in Japan, Ricoh competes with Xerox Corp. (XRX), Canon Inc and Konica Minolta Holdings in printers and copiers.
Shiro Kondo, CEO of Ricoh Company Ltd., said, "Ikon has terrific strength in areas that complement Ricoh's growth strategy. Ikon has advanced Professional Services capabilities with a long list of satisfied large customers. Ikon is respected as well for its production print sales and service expertise."
The combination of Ikon and Ricoh is expected to leverage Ikon's sales and services capabilities with Ricoh's engineering and manufacturing expertise to better meet the needs of customers by offering full end-to-end office solutions and services. With over 400 sales and service locations, Ikon has a long track record with Fortune 500 companies among its customers.Further, Ikon is already a customer of Ricoh.
Commenting on the specific impact of the transaction on its financial results for the fiscal year 2009, Ricoh said it "will be disclosed when appropriate."
For Ikon, the deal comes when it is struggling amid weak economy and rising costs. Last month, the company said its third-quarter net income increased to $32.08 million or $0.34 per share from $29.07 million or $0.23 per share in the year-ago quarter.
In July, Standard & Poor's raised its ratings outlook on Ikon to "stable" from "negative," citing "an improved financial profile following recent debt reductions and improvements in operating results."
The acquisition, which is not contingent on financing, is expected to close during the fourth quarter of calendar 2008, subject to customary closing conditions. Thereafter, Ikon will become a subsidiary of Ricoh and continue to be headquartered in Malvern, Pennsylvania.
Ikon got the financial advise on the transaction from Goldman, Sachs & Co., while its legal counsel is Cravath, Swaine & Moore LLP. On the other hand, Morgan Stanley is acting as financial advisor to Ricoh and Morrison & Foerster is acting as Ricoh's legal counsel.
On the buyout news, shares of Ikon Office are currently up $1.49 or 9.58% and trading at $17.05, its highest level since January 2007. For the past 52-weeks, the stock has been trading between $6.73 and $16.41.
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