Consolidation: it has irrevocably redefined the landscape of the Australian and New Zealand printing industries. While buy-outs are bound to remain on the agenda among the acquisitive likes of Geon and Blue Star, consolidation in the vendor community also continues apace, with heavy impli-cations for printers. While 2009 was the year of the offset mega-merger that wasn’t, this year’s digital super-deal between Canon and Océ looks on track to pass.
With Heidelberg and manroland, the potential tie-up was so giant it would have left the past decade of deals in the shade. And the resulting offset behemoth would have been good news for its owners in a climate of dwindling heavy metal sales.
Heidelberg track record is filled with M&A activity, not just investment but divestment, such as the sale of Web Systems to Goss and its share of NexPress to then-partner Kodak.
Kodak itself went on the acquisition trail to take hold of the production market, pushing into CTP and workflow with Creo. HP has been on a decade-long spree, getting into digital with Indigo in 2001, then pushing for wide-format dominance with takeovers of Scitex Vision in 2005, and NUR and ColorSpan in 2007.
Some of the biggest moves lately have come in the form of digital manufacturers buying up distributors (see box). The most significant of these was Ricoh’s US$1.6bn takeover of Ikon Office Solutions. The deal took market share from Canon – which brings us to Canon’s bid for Océ.
Stumbling blocks
Canon’s buyout is still not set in stone – and hasn’t been without its stumbling blocks. First, 10% shareholder Orbis Fund Management said the Japanese offer “significantly undervalued” the Dutch manufacturer. More recently, 3.3% stakeholder Hermes Focus Funds branded the bid “meagre”. Still, voices of opposition look unlikely to halt the acquisition.
What would a Canon-Océ business mean for the print industry? In a ProPrint poll late last year, 78% of respondents said it would be good thing. According to US print guru and ProPrint columnist Frank Romano, the deal is “a brilliant idea”.
“They really supplement each other. Canon has stayed in the sheetfed, moderate to low-end of the market, while Océ has gone from the moderate to the high end of the market.”
In Australia, Canon’s top seller has been the 4,200iph ImagePress C7000VP, said corporate communications manager Shane McClelland.
According to Romano, Canon’s biggest problem is that it has lost sales channels, most recently Ikon. Canon kit had made up 60% of the Ikon range. Analysts claimed Ricoh’s buyout could knock US$1bn off Canon’s North American sales. Ricoh has an aggressive strategy of distributor takeover, such as the acquisition of Danka’s European arm in 2008, while Danka’s US network went to Konica Minolta.
And it’s Konica that should feel Canon’s Océ bid most keenly. Until recently, Konica had been tipped as the most likely suitor for the Dutch vendor – the two having signed a cooperation agreement
in early 2008. So it came as a surprise to some when Konica announced it wasn’t interested in Océ, and wouldn’t launch a counter-bid.
Romano said: “My feeling is Konica intends to put their own products together and expand their organisation and they think they can do that without any help.”
For Canon, Océ would open up a whole new distribution channel, said Romano. “They get a mature, very focused sales organisation into other areas.”
Certainly Australian printers widely compliment Océ’s sales force. Sydney-based Océ customer Bright Print Group backed up the vendor’s reputation for top customer service. Managing director John Bright said: “You only get a reputation because it’s true. They’ve got a good reputation because they do have good service.
“We have personal support from the maintenance people – we can call them any day, any time on their mobiles and they’re happy to take the call, whereas some vendors perhaps aren’t. Others are stricter in making you ring the service centre and log the call before they’ll send a tech out. Océ aren’t like that – you can build a relationship,” added Bright.
Bright has first-hand experience of the potential positives and pitfalls of M&A activity. “We ourselves have acquired and merged over the years. It’s always about keeping the good people. A business is only as strong as the people it employs.
I’d only be concerned if there were major changes to the people I deal with [at Océ], because I’ve built relationship over the last seven to eight years,” said Bright.
He added that the only other issue would be if Canon wanted to “take over the maintenance side of things, and change it to their way, which might not be suitable for us”. Bright’s overall attitude to the deal is “wait and see”, especially as there are still a host of hurdles to clear before it is completed.
The technological benefits of the tie-up are clear. “There are phenomenal synergies at every level,” said Romano. “For example, Canon has a lot of patents in wide-format inkjet, but very few products.” (In fact, Canon said that in 2008, it was ranked in the top three worldwide for patents over the last decade, with 2,114.)
“They haven’t made the splash [in wide-format] that HP has. Océ has been limited in their technology because they have to put together pieces from many different companies – heads from one company, transports from other companies etc.
“So now they would be able to combine both of their technologies into one organisation and develop a wide array of new wide-format machines. That would allow them to compete more aggressively with HP, which has the widest array of machines in the industry,” he said.
Romano pointed out that the capital and resources Canon can put into R&D resources would be a huge help to Océ’s technology. “Canon has phenomenal technology – their problem is they’re not very good at getting it out. Océ is good at getting products out.”
Wide-format crown
Canon’s move overshadowed a different 2009 digital tie-up worth mentioning. Late last year, Agfa bought out Canadian large-format manufacturer Gandi Innovations. While small beer in comparison to Canon’s €730m ($1.14bn)offer, it’s another attempt to take wide-format share from HP. One industry expert ProPrint talked to said he was unsure whether the deal would be much of a help to Agfa’s wide-format strategy, but did point out that Gandi brings the Belgian manufacturer a family of heavy ink-consuming machines.
Romano said: “Agfa has a great advantage in inkjet because they can manufacture the ink, and they’re starting to get good at manufacturing the heads too.” The buyout also represents a need to diversify outside the CTP market, where sales have levelled off and plate volumes are shrinking. “The only place they can grow is in inkjet,” added Romano.
Agfa Graphics vice president inkjet Richard Barham said: “This is an important step in implementing our inkjet growth strategy. As our own portfolio consists of entry-level and high-end inkjet systems, Gandi Innovations’ mid-range systems are a 100% complementary fit with our existing inkjet technology.”
No redundancies are expected, said Barham, and integrating the Canadian firm into the business culture of its new Belgian parent shouldn’t be too fraught – especially not compared with trying to bring a Dutch mentality into a Japanese environment.
One of Canon’s Australian competitors told ProPrint that he thought this cultural clash could be a real hurdle in the merger. He praised Océ’s sales approach in Australia, and said Canon would need
to be careful not to damage it.
Romano, however, isn’t worried about Euro-Asian integration. Having recently visited Canon’s US headquarters, he said the Western and Eastern union worked well. “In the cafeteria, they had tofu intermixed with American food. I didn’t see any clashes. The Japanese are very good at adapting.
“Whether it’s a Dutch company or an American company or a Japanese company, the Japanese find a way to adapt,” he said.
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