The Chinese company, Apex Technology Co Ltd, has reached an agreement for the purchase of American printer maker, Lexmark. The deal involves an all cash purchase at $40.5 per share, translating to a total of $3.6 billion. This takes Lexmark private and off the New York Stock Exchange.
Apex Technology is a manufacturer of generic inkjets and laser cartridges based in Zhuhai, Guangdong, China. The company has received support from the Chinese State Fund last year for 500 million Yuan or $77.4 million. The company hopes to upgrade its own technologies via the purchase of Lexmark.
“We are excited to work alongside Lexmark as it continues to invest in advanced technologies and solutions to best serve its customers and business partners while simultaneously pursuing additional untapped opportunities for future growth,” Apex Technology Chairman, Jackson Wang, said. He added that they would fuse Lexmark’s technological know-how with Apex’s cost effective production and knowledge of emerging markets.
Apex Technology leads a Chinese consortium that includes PAG Asia Capital and Legend Capital. Legend Capital is affiliated to Lenovo via the latter’s biggest shareholder, Legend Holdings. Legend’s past experiences in successfully closing deals involving US asset acquisitions would be very useful as the transaction with Lexmark would still have to pass the scrutiny of the US Committee on Foreign Investment. The Chinese has continued its aggressive interest in the purchase of US based assets. The more recent high profile, but failed attempts include Starwood Hotels and Fairchild Semiconductors.
The Chinese offer appears to be the solution for struggling printer and software company, Lexmark. Formerly the low end desktop printer division of IBM, the company was spun off and sold to Clayton Dubilier & Rice in 1991.
The company has found difficulties due to the market’s unexpected and quick shift within the printing industry. Screen only versions of pictures from social media and paperless drives for environmentally conscious companies in addition to an assault from generic ink cartridge competitors have continuously driven the printing industry’s revenue down in the past few years. Lexmark’s $3.55 billion in revenue in 2015 was a decrease of 15% from 2014 revenue. Competitors like HP and Xerox have found themselves in a similar predicament and had been forced to separate their printing business from their other divisions.
In October 21, 2015, Lexmark announced that it was studying strategic options to optimize the value of the company. After engaging Goldman Sachs as an advisor, the company has agreed to accept Apex’s offer, which is 30% higher than Lexmark’s October 2015 price and 15% above the stock’s 34.66 close on Tuesday.
“With the Consortium’s resources, we will be able to continue to invest in and grow the business to more fully penetrate the Asia Pacific market for hardware, software and managed print services,” Lexmark’s chairman and chief executive, Paul Rooke, stated. Rooke will continue to be at the helm of Lexmark after the deal. The company’s business will remain uninterrupted, with its manufacturing and software divisions running business as usual, and the business address staying at Lexington, Kentucky.