Minimum Acceptance Level Océ Not Reached – What Will Canon Do Next?

Canon announced today that 71% of Océ’s shares have been tendered to Canon, which is below the 85% that Canon required to go ahead with the deal. Now that ‘only’ 71% has been tendered or acquired by Canon, the company needs to make a decision about what to do next. They have the following options:

A. Lower the Acceptance Level
Canon could lower the acceptance level, e.g. to 70%, but by doing so a relatively large share of minority shareholders remains. As stated in the Offer Memorandum, dated Jan. 28^th, Canon aims to get 100% of Océ’s shares. It could deploy a legal merger or ‘otherwise obtain full ownership of the Océ business, including by way of a liquidation, a de-merger [..], a sale of all or substantially all of the assets of Océ which may or may not be followed by a distribution of proceeds to the Shareholders or a cross border statutory triangular merger, all in accordance with Dutch law, other applicable laws and the Articles of Association of Océ at that time.’ (page 18 of the Offer Memorandum). Nevertheless, chances are that those proceedings will not be accepted by the minority shareholders, and could result in expensive and lingering court actions for Canon.

B. Extend the tender period
Under Dutch law Canon can announce a 14-day post-acceptance period in the hope that some minority shareholders can still be convinced to tender their shares. Canon said that it will make a decision on this by Thursday March 4^th, which is one day after tomorrow’s court hearing. (See our previous blog post on this issue, some shareholders have asked the court to roll-back a few decisions Océ recently made that have diluted their interest). The outcome of this court hearing is scheduled for tomorrow Wednesday March 3.

C. Cancel the deal

Although unlikely, Canon could still pull back out of the deal. Canon needs Océ to become a player that can compete in full in production environments with Ricoh, Xerox, and HP, and it will therefore not easily give up on this bid. Other options, such as raising the offer price, have been earlier dismissed by Canon and Océ. It is also worth noting that Océ’s shares have been trading between €8.55 and €8.60 since Canon made the bid, which points to investor confidence that the deal will go ahead at the current price.

An extension of the tender period appears to be the most likely option at the moment for a few reasons, but most importantly because it will give Canon some time to review its options. As there are no other competing bidders for Océ and the share price remains stable, the immediate issue is not whether the deal will go through but whether Canon will choose to make concessions either in its acceptance level (previously stated at 85%) or in its share price offer.

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