The NexPress: soon to be 100 per cent Kodak-owned

Bernhard Schreier, CEO of Heidelberger Druckmaschinen AG (Heidelberg), says: “The two portfolio decisions will decisively accelerate the realignment process. From now on, Heidelberg will strengthen its focus on the Sheetfed Offset business in order to optimally serve commercial, packaging and label printers with a comprehensive product portfolio. We are convinced that this strategy will lead Heidelberg back to profitability very quickly”.

A one-time charge for the transaction of Euro 525 million had already been set aside in Heidelberg’s books for the third quarter of the 2003/2004 financial year. Says chief financial officer, Dr. Herbert Meyer, “We expect no further burdens for the current fiscal year. The improved profitability of the Group will become visible by the beginning of next fiscal year”.


Subject to agreement by the anti-trust organisations in Germany and the United States, Heidelberg is transferring all of its digital print activities to Eastman Kodak Co: the digital black and white business (HDI LLC) based at Rochester, New York; its 50 per cent share in the Heidelberg/Eastman Kodak Co. joint enterprise venture (Nexpress Solutions LLC) also based at Rochester; and its 100 per cent share of Nexpress GmbH in Kiel, Germany.

As part of the transaction, Heidelberg has agreed that it will not engage in competitive activities related to the digital division to be transferred for a period of two years.

Under the terms of the acquisition, the companies have agreed to use a performance-based earn-out formula whereby Kodak will make periodic payments to Heidelberg over a two-year period, if certain sales goals are met.

According to a statement, acquisition of the digital assets from Heidelberg advances Kodak’s strategy of diversifying its business portfolio and accelerates its participation in the digital commercial printing industry. Earlier this year, Kodak completed the purchase of Scitex Digital Printing, a leader in high-speed, variable-data inkjet printing, and renamed the company Kodak Versamark, Inc.

“Consistent with our digitally oriented growth strategy, Kodak is rapidly assembling the components to become an industry leader in digital commercial printing”, says Daniel A. Carp, chairman and CEO, Eastman Kodak Company. “This acquisition reflects our plan to broaden our product portfolio and expand our lines of digital businesses in a selective, disciplined manner. As I indicated on January 22, I continue to anticipate that our acquisition activity in 2004 will be significantly lower than the approximately $1 billion of total actions announced in 2003. Our focus for the remainder of 2004 will be the integration of the acquisitions we have already announced, all of which are on, or ahead of, plan”.

If all sales goals are met during the next two calendar years ending December 31, 2005, Kodak will pay Heidelberg a maximum of US$150 million in cash for the digital businesses. Additional sales related earn-out payments over a five-year period are agreed, if certain sales targets are achieved. Kodak will not pay any cash at closing for the business being acquired. Further financial details of the transaction were not disclosed.

“This is Heidelberg’s reaction to the changes in market dynamics within the Print Media Industry”, says Schreier. “As announced, Heidelberg will reallocate its resources and refocus its efforts, in alignment to its core customer base, on the Offset sector. Our global sales organisation will continue to work closely together with Kodak in the digital printing area”.

As part of Heidelberg’s new alignment, announced in November 2003, the company will intensify its focus on the sheetfed offset, prepress and finishing businesses, as well as their attached workflow systems, training and service activities. Integration of digital printing in print shops’ workflows, using Prinect, will remain part of the Heidelberg service offerings and will be intensified.

In effect, the Heidelberg operation at Rochester will be absorbed by Eastman Kodak Co. Approximately 2000 people worldwide have been employed in the research, development, production, sales and service activities of the Heidelberg Digital business.

The Nexpress Solutions LLC joint venture was created in 1997 by Heidelberg and Eastman Kodak Co to develop a digital colour printing press for the high-end market segment. Heidelberg subsequently acquired Eastman Kodak Co.’s Office Imaging black and white digital printing activities in 1999.

In financial year 2002/2003, Heidelberg’s digital division achieved sales of Euro 240 million, accounting for approximately six per cent of its total sales of Euro 4.1 billion.

Web offset

Pending successful consultation with workers’ councils in France and the Netherlands and the agreement of anti-trust organisations, Heidelberg will transfer its web offset division to Goss International Corporation. An outline deal has been agreed in principle though some issues remain to be resolved before definitive documents are expected to be executed over the coming weeks.

The transaction includes Heidelberg’s commercial web and newspaper presses and also incorporates the web finishing business in the United States.

Heidelberg will become shareholder at Goss International, holding slightly below 20 per cent of the company’s shares. The financial details of the agreement were not disclosed.

“The market volume for web offset printing presses has diminished”, says Schreier. “The weak economy and the corresponding low levels of advertising spending contributed to this development”.

Bob Brown, CEO of Goss International says: “We have respect for the Heidelberg Web Systems team and product portfolio. An acquisition opportunity of this type would assist our efforts to grow our global web press business”.

Both companies expect substantially improved capacity utilisation and optimised market penetration from the business combination and restructuring of their activities.

Upon closure of the deal, nearly 2100 former Heidelberg employees at sites in the United States, France and the Netherlands will be transferred to Goss International.

In order to complement its own press building activities, Heidelberg acquired Harris Graphic Corporation in 1988 and with it, manufacturing sites in the United States and France marking Heidelberg’s enhancing its activities in the web offset market. The subsequent acquisition of Stork Contiweb in the Netherlands allowed Heidelberg to add splicers and dryers to its product portfolio in the web offset segment.

Heidelberg’s web offset division achieved Euro 430 million in sales in the 2002/2003 financial year, accounting for approximatey ten per cent of Heidelberg’s total sales of Euro 4.1 billion.

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