Canon to Acquire Océ

Anne Valaitis
Nov 16, 2009

Today, Canon Inc. (trading symbol CAJ) announced a public cash offer for all the shares of Océ (trading symbol OCE).  Canon intends to make an offer of € 8.60 per Share (cum dividend) for 100% of the outstanding Shares of Océ, representing a premium of 70% over Océ’s closing share price of Friday 13 November 2009 and 137% to the average share price over the last 12 months, this makes the deal worth about 1.1 billion dollars.

In the wake of other major acquisitions in the last year, particularly Ricoh’s acquisition of IKON, there has been much speculation about what Canon will do. Now that Canon has agreed to acquire Océ, it is clear that one of its strategic options has been selected.

InfoTrends believes Canon has taken an important step to position itself on a similar plane as Xerox, Ricoh/InfoPrint and HP relative to products, services and distribution. While each company has their relative strengths, Canon can claim to offer products from the desktop through ultra high speed production, along with outsourcing services, and national and global account management.

Key implications of this acquisition for Canon include:

  • Greater access to key application/market segments – transaction print, direct mail, publishing outdoor graphics, technical/engineering
  • Comprehensive technology portfolio – Wide format printing (UV, EP), high speed continuous EP, document/output management software
  • Expansion into business outsourcing services (OBS) with the potential to extend product through HP/EDS based on the recent Canon/HP enterprise print alliance
  • Increased direct sales distribution especially in Europe and North America
  • Greater market share that should enable it to better fund product development and achieve lower manufacturing costs
  • Disruption of OEM agreements and technology partnerships such as Konica Minolta, Sharp, Toshiba TEC, Kodak and others

Canon’s President and COO Tsuneji Uchida says:
“We are delighted to welcome Océ, the ideal partner in every respect, into the Canon Group. Through the merger of Canon and Océ, we believe that we will be able to realize clear benefits, not only in the area of R&D, but also in terms of product mix and marketing and are confident that this winning combination will contribute greatly to our goal of becoming the overall No. 1 presence in the printing industry.”

Océ’s CEO Rokus van Iperen says:
“I am very much looking forward to joining forces with Canon. There is a great fit between our companies, which share similar values and a strong commitment to technology and innovation. I am proud Canon intends to team up with Océ, based upon the prominence of our customers and technology and of course our people that have shaped our company for generations.
This is the best possible combination in the consolidating global printing industry and will deliver scale in R&D, manufacturing and distribution. The combined organization provides us with access to a huge sales network in Asia as well as mutual cross selling opportunities in Europe and the United States. Our customers will benefit from an outstanding product and services offering and our employees will be offered appealing development opportunities.”

Office Perspective

InfoTrends believes Canon’s planned acquisition of Océ has a modest impact on office equipment and solutions.  Océ has had a very limited presence in the office imaging market, Océ-branded products accounted for less than 1% of total U.S. printer and MFP placements in 2008. The Océ office solutions portfolio consisted mainly of an agreement with eCopy and Prism Software for scanning and document management software.  Canon has had a long standing relationship with eCopy (now Nuance), arguably it’s most successful solution platform.  Canon will acquire an existing customer base and some distribution capacity but the total office market coverage for Océ is limited, which means that the benefits to Canon are somewhat limited as well.

Canon will acquire very little in the way of office imaging technology from Océ that it cannot already meet or surpass with its own technology. Océ does not manufacture its own printer or MFP platforms but instead re-brands equipment from other OEM suppliers. Océ’s current product lineup is dominated by re-branded versions of Konica Minolta engines, but the firm also has OEM partnerships with suppliers such as Toshiba, Sharp, Okidata, and others.

Canon will acquire an existing customer base and some distribution capacity but the total office market coverage for Océ is limited. Océ has some independent office equipment dealers, but the overwhelming majority of those carry multiple lines, and most of them already carry Canon-branded product. Océ’s more than 75 direct sales branches, which are comprised primarily of former Imagistics locations in the US, are mostly dedicated to selling OEM-branded office product and production-class Océ hardware. In North America, many of the Océ sales offices are in the same metro areas as Canon Business Solutions Offices. Océ also has significant distribution in Europe while Canon has extensive distribution in EMEA, Asia Pacific and the Americas.

According to the joint press release, Océ’s office business will immediately be integrated into Canon’s Office Imaging Products (OIP) division. Given the overlap in products and sale office redundancy, we anticipate Canon will soon begin to phase out the Océ-branded products and potentially consolidate distribution outlets.

Production and Wide-Format Perspective

InfoTrends believes that the acquisition of Océ will help to extend the product portfolio through the entire digital production printing line.  The high end of Canon’s production offerings were the color and monochrome imagePRESS products, with the acquisition Canon gains a foothold in the growing continuous feed color inkjet production market.

InfoTrends feels that Canon’s proposed acquisition of Océ raises immediate questions about Océ’s partnership with Konica Minolta that has been going on for several years. Océ announced an expansion of the OEM partnership in January of 2008, at which point the company said it would sell Konica Minolta’s full product range worldwide. The companies also stated that they would cooperate on product development for high-volume cut-sheet printers. In 2008 Konica Minolta began distributing Océ’s VarioPrint 6000 series of cut-sheet printers. Konica Minolta and Océ seemed content with this partnership and did not make any overt gestures that the relationship would move toward an acquisition or merger. Now it appears likely that Océ will have to extract itself, not only from the OEM product part of the partnership but from the joint development they were doing together, which presumably could be coming to fruition around now.

We believe that this acquisition might serve as a sign that the Canon/Kodak relationship is coming to an end. After Canon announced the monochrome imagePRESS products, it became only a matter of time before the relationship would end between Canon and Kodak regarding the sale by Canon of Kodak’s Digimaster line.

InfoTrends believes wide format is only a very small part of what this acquisition was about, but from a wide format perspective Canon’s acquisition of Océ makes sense;

  • Wide format UV-curable inkjet; Océ’s wide format UV-curable inkjet printers, the Arizona series, are certainly among the industry-leading solutions in terms of installed base and shipments. InfoTrends believes that UV-curable inkjet is the fastest growing segment of the wide format graphics market and that Canon stands to substantially benefit from the acquisition of the Océ product line in this segment.
  • Wide format toner-based inkjet: Océ is also a leader in the wide format toner-based inkjet printer market with its TDS and PlotWave solutions. Océ has the largest installed base of wide format toner-based printers and has recently launched new technology platforms for the color and low-end segments of the market.
  • RIP technology; part of the Océ wide format portfolio is Onyx Graphics, one of the leading RIP solutions in the wide format market.
  • Océ has extensive reprographic and engineering document management software, scanning, and controller products and development expertise.

While wide format likely played only a small role in this acquisition, wide format is a gem in the Océ company. According to the Océ 2008 annual report, the wide format business represented 29% of revenue, but 89% of the company’s net income. So even while Océ has struggled, its WFPS division has remained profitable, been highly competitive against bigger competitors like Xerox, HP, and Ricoh, and delivered new products and technologies for the future.

Services

Perhaps the biggest opportunity for Canon will come from services.  Canon has not historically been a strong player in the services space, but the acquisition of Océ and their OBS group positions them for rapid growth.  Océ Business Services provides facilities management services for mailroom automation, managed print and imaging.  InfoTrends has observed heightened activity surrounding managed services with an emphasis on output (MPS), strong offerings are available from Xerox and HP but traditional FM entities such as Pitney Bowes have made significant efforts through acquisitions such as Print Inc. (acquired in 2006 for $47million).  Canon is now tasked with transitioning from a product centric vendor, whether it office or production, to providing services for print, mail and document workflow.

The office equipment and production printing related industry continues to transform and consolidate;  we anticipate increased acquisition and alliance activity that will no doubt reshape the competitive landscape.

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