Lexmark bought by Chinese group for $3.6bn

June 2016 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Following an “exhaustive” review of alternatives, US printer manufacturer Lexmark International Inc. has announced that it is to be sold to a Chinese consortium led by Apex Technology and PAG Asia Capital in a deal worth $3.6bn. The deal, Lexmark hopes, will help to bolster the company’s standing in the Asian market.

According to a statement released by Lexmark, the Chinese group made an all-cash offer for the firm which will see Lexmark’s shareholders receive $40.50 per share held in the company. The agreed price represents a 30 percent premium to Lexmark’s closing price on 21 October 2015, the day before the news broke that it was exploring strategic alternatives.

The deal will be financed through a combination of equity contributions by the consortium and debt. The merger has already won the approval of Lexmark’s board of directors and is expected to complete in the second half of 2016, subject to approval by shareholders, regulators in the US, China and certain other foreign jurisdictions, and other customary closing conditions.

“This is an exciting transaction that Lexmark’s board of directors believes is in the best interests of our shareholders following an exhaustive strategic alternatives review process to maximise value,” said Paul Rooke, Lexmark’s chairman and chief executive. “The transaction will benefit our customers and provide new opportunities for our employees. As part of the consortium, Lexmark will be able to reach the next level of growth and innovation, to the benefit of our customers, business partners and suppliers, faster than we could achieve on our own. 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 has confirmed that the company will remain headquartered in Lexington, Kentucky, and Mr Rooke is expected to continue in his role as the firm’s chairman and CEO. “Lexmark is a recognized global leader in printing technology and enterprise software, with a proven track record of performance, a consistent annuity-based business model and a talented workforce,” said Weijian Shan, group chairman and CEO of PAG. “We look forward to working with Lexmark’s management team and focusing on expanding the business in the Asia Pacific region.”

“Lexmark’s passion for excellence and unwavering commitments to customers, employees and communities represent a tremendous cultural fit,” said Jackson Wang, Apex Technology chairman. “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.”

Driven by the slowing domestic economy, Chinese buyers have enjoyed a particularly active first half of the year. According to data from Thomson Reuters, Chinese acquisitions totalled $101bn in the first quarter of 2016 – 15 percent of global dealmaking activity. Chinese companies have been pursuing deals for established brands as they hope to acquire expertise to import into their domestic market. Apex technology, which manufactures components for laser and ink-jet printer cartridges, stands to benefit from the acquisition of Lexmark.

Lexmark, too, has been heavily involved in dealmaking activities in recent years. The company focused increasingly on software acquisitions as a means of diversifying its revenues in the highly competitive printing business. As a result of its dealmaking, Lexmark posted revenue of $3.55bn in 2015. Earlier this year, the company announced the removal of around 550 jobs over the course of 2016, around 4 percent of its workforce.

Richard Summerfield