Tuesday, November 24, 2009

What is Next for Hewlett-Packard?

Mark Hurd knows best how to take cost out of business. Accordingly, during his tenure, HP has taken on a mission of buying/consolidating industries while ruthlessly cutting costs. The strategy seems to be paying off in PC and Services. In my opinion, he needs to badly restructure the printer business by reshuffling executives of the division, hiring in an industry veteran with track record in high-end production and digital publishing, outsourcing all print engine manufacturing to Canon, putting EDS commerically in lead over printer division’s sales force and channels, taking at least $2B cost out of the business. Ironically, all businesses that used to save the company’s bottom-line under Carly Fiorina have turned into money-loosing problem children under Mark Hurd's leadership….the following appeared on WSJ this morning.

H-P Gets a Boost from Services, Cost Cutting

Hewlett-Packard Co. reported a 14% jump in quarterly profit, an indication that a big bet on technology services and cost-cutting has put the Silicon Valley giant in a strong position as the economy starts to recover.

The fiscal-fourth-quarter results, which H-P had previewed, contrast sharply with a 54% drop in profit announced by rival Dell Inc. last week. Results for H-P's personal-computer business showed the company has increased its market share, in part because H-P is stronger in consumer segments that have accounted for most PC growth recently.

Computer makers have been hurt by falling prices, which have held revenue down though PC demand has been improving. Gartner Inc., a market research firm, on Monday projected that global unit shipments will rise 2.8% this year; in September it had forecast a 2% decline.

H-P, the world's largest tech company by revenue, is considered a bellwether in the sector because its broad business portfolio includes printers, PCs, corporate technology systems, and tech outsourcing services.

Although H-P's revenue fell 8.4% in the quarter, the results were seen as a sign that conditions are improving in the tech sector. "This is further indication that things have stabilized," said Shaw Wu, an analyst with Kaufman Bros.

Cathie Lesjak, H-P's chief financial officer, predicted in an interview that business conditions for the company will be better in 2010 than in 2009.

"We feel as good about our portfolio and our market position as we ever have," added Mark Hurd, H-P's chief executive, during a conference call. "So make no mistake about that. If you talked about our view of our competitive position, it just has never been stronger."

The Palo Alto, Calif., company reported income for the period ended Oct. 31 of $2.41 billion, or 99 cents a share, up from $2.11 billion, or 84 cents a share, in the year-earlier period. Revenue declined to $30.77 billion from $33.6 billion.

H-P's results included a 48% jump in operating profit to $1.4 billion for its services businesses, reflecting cost cutting following its $13 billion purchase of Electronic Data Systems last year.

Revenue from services increased 8%, though the year-ago quarter included only two months of EDS revenue, Mr. Wu noted.

Ms. Lesjak said if last year's period included a full quarter of EDS revenue, H-P's overall services sales would be "down double digits" due to a drop in corporate spending and accounting changes related to the merger.

But she said H-P is about one-third of the way toward finishing a plan to remove $3 billion in annual cost from the EDS business. She also said the EDS unit has started to generate sales of equipment like PCs, though the results of such sales weren't significant last quarter.

In PCs, H-P said it has become No. 1 in sales of computers to large U.S. businesses, Dell's historic stronghold. H-P said its PC division posted an 8% increase in shipments from the year-earlier quarter, though its revenue declined 12%.

Dell, in contrast, reported a PC revenue drop of more than 19%; it didn't quantify unit shipments, but Gartner estimated that Dell's unit sales declined 6.7% in the quarter.

H-P's storage and servers division, which sells server systems, reported a 17% revenue decline. Its printer business, which used to account for most of its profit thanks to high-margin ink sales, continued to wane as people reduce their reliance on printed material. The division reported a revenue drop of 15%; printer shipments decreased 20%.

H-P said it expects revenue of $118 billion to $119 billion for the 2010 fiscal year, up from a prior projection of $117 billion to $118 billion.

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A Look at Xerox’s Big Concessions in Its A.C.S. Deal

The following appeared on NYT's DealBook yesterday. I don't think a competitive bidder would come in at this valuation level and pay a $194M break-up fee. Besides, Xerox shareholders have no hope but to approve the merger to at least retain some hope to catch up with HP in services rather than trying to do it in house via Xerox Global Services, too little too late!


A stipulation of settlement in a shareholder lawsuit over Affiliated Computer Services’ deal with Xerox was filed Friday evening in Dallas County court in Texas.

The lawsuit, brought by A.C.S. shareholders, is as unusual as the deal itself and may signal more bumps in the road for investors of both companies.

In the settlement (available after the jump), Xerox agreed to two things:

· It agreed not to enforce the voting agreement it entered with A.C.S.’s chairman, Darwin Deason. Mr. Deason controls a 43.6 percent voting interest in A.C.S. and previously agreed to vote in favor of the Xerox deal. Even if A.C.S.’s board recommended a competing transaction as a superior proposal, Mr. Deason was still locked in to vote half of his shares, or 21.8 percent of A.C.S.’s outstanding stock, in favor of the Xerox deal. (I discussed the terms of the merger here.) A result of this part of the settlement is to remove any obstacles to Mr. Deason’s endorsing a higher bid if A.C.S.’s board deems it superior.

· It also agreed not to enforce the force-the-vote provision in the merger agreement. Before, not only did Xerox have 21.8 percent of A.C.S. votes locked up, but it also could force the target to hold the meeting for the shareholder vote. Commonly called a force-the-vote provision, this feature is allowed under the laws of Delaware, where A.C.S. is incorporated. Xerox now has agreed to end the merger agreement if A.C.S.’s board recommends another bid as a superior proposal.

The vital part of accepting a higher third-party bid is now defining what is a “superior proposal.” The A.C.S. board can recommend such a bid only if it deems that offer to meet those terms. Such a proposal is defined as any that the board determines to be:

(i) more favorable to the stockholders of [A.C.S.] from a financial point of view than the transactions contemplated by this agreement (after giving effect to any changes to the financial terms of this agreement proposed by [Xerox] in response to such offer or otherwise) and (ii) reasonably capable of being completed on the terms set forth in the proposal.

This settlement follows an earlier agreement in the Texas lawsuit to effectively amend the merger agreement to permit A.C.S. to provide confidential information to a third-party bidder. A.C.S. can do so for any offer that its board “determines in good faith to be reasonably likely to lead to a proposal that provides greater consideration to the A.C.S. Class A stockholders than provided in the merger agreement, which offer may be made expressly contingent on due diligence and obtaining financing commitments and may be subsequently modified or withdrawn.”

A result of these two agreements is that the door is now open for a third-party bidder to step in – provided it is willing to pay the $194 million termination fee and tolerate Xerox’s matching rights. The rights afford Xerox three business days to match any new superior proposal and require that A.C.S. negotiate with all parties in good faith during that time.

Why did Xerox agree to this far-reaching settlement, which to my knowledge is unprecedented? The first explanation is that the lawyers representing the shareholder plaintiffs have done a good job of convincing the judge that the lockups are inappropriate. Xerox saw the writing on the wall and agreed to waive them.

(Even though A.C.S. is a Delaware company, it is headquartered in Texas, letting its shareholders sue in that state. I doubt that a Delaware judge would have ruled on the lockups the same way, even post-Omnicare. For those who don’t understand that reference, see a previous post here.)

The second possible explanation is realpolitik. Xerox is still struggling to convince its shareholders to approve the deal. A competing bid may kill two birds with one stone by giving the company an easier exit with a $194 million payment, instead of Xerox owing A.C.S. $65 million. The $65 million is the fee Xerox must pay if its shareholders vote down the merger. This may help explain why Xerox did not fight this issue through to trial.

I suspect the true answer is a mix of both.

In any event, the litigation isn’t over. As part of the settlement, the Texas plaintiffs are joining a separate, pending shareholder lawsuit in Delaware’s Court of Chancery. That suit’s focus will turn to Mr. Deason’s $300 million premium and the propriety of the actions of A.C.S.’s special committee in approving a deal with this special, unusual premium.

I hope that the depositions of the special committee are made public, because I suspect they will show a carefully scripted process with Cravath, Swaine & Moore(sometime counsel to Mr. Deason, sometime counsel to A.C.S.) as the author. The question is how independent the committee was in this scripted process, given that it was selected and signed off on only a few years ago by Mr. Deason himself, likely advised by Cravath.

This lawsuit likely won’t stop the deal, but the Texas settlement once again shows there is nothing ordinary about this transaction. I suspect that we may continue to see collateral effects from this litigation — and that Friday’s settlement won’t be the last interesting event in this merger’s lifespan.

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Wednesday, November 18, 2009

Konica Minolta Not Planning Counterbid for Oce

According to the media, Konica Minolta, has no intention of making a counter bid for Dutch printer maker Oce. A spokesperson for Konica Minolta told a press agency yesterday it had considered acquiring Oce but it abandoned the plan and is for the moment not planning an offer for Oce.

On Monday, Canon, the Japanese printer maker, made an offer for Oce. The total value of the offer for all outstanding shares in Oce at EUR 8.6 per share, is EUR 730M, as reported earlie on this blog.

In my opinion, a counter offer would have meant too much premium for Konica/Minolta on top of what Canon is already willing to pay. Also, Konica itself suffers from a merger hang-over with Minolta. Acquiring a Dutch firm with a unique culture, high-end production presence and a direct sales covergae model would have paused significant risks. However, from now on any supplier other than Ricoh, Xerox, Canon and HP should expect to be a takeover candidate or risks being shut down as a money loosing internal division of a larger conglomerate. Times will be increasingly tough in the Office & Production markets.

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Tuesday, November 17, 2009

Cisco Close to Acquiring EMC

Cisco Systems (Nasdaq: CSCO) could be closer to acquiring my old company EMC (NYSE: EMC) now in light of the recently announced joint venture. On 3 November 2009 San Jose, California-based Cisco Systems, Hopkinton, Massachusetts-based EMC, and Palo Alto, California-based VMware (NYSE: VMW) announced a new joint venture called the Virtual Computing Environment coalition. This venture is based on the new “Vblock Infrastructure Package,” which will provide a private cloud, which is a virtual IT infrastructure, for enterprise size organizations. A Cisco spokesperson explained that the Vblock uses technology from all three companies and that service and support will be consolidated so that customers will only have to make one call to get help with any area of the Vblock.

In light of this new joint venture it might only be a matter of time before EMC is acquired by Cisco. This could make for a really interesting combination; The acquisition of EMC by Cisco has been rumored for years and this move has certainly brought them much closer. In the technology sector, joint ventures are often the way companies get to know each other better before entering into an M&A event. John T. Chambers (CEO of Cisco) and Joseph M. Tucci (CEO of EMC) are very close and had worked together previously at Wang. Furthermore, in light of the recent announcement that HP will be acquiring 3COM, whose core product line is routers and switches, Cisco could also now be feeling under attack. An EMC acquisition could certainly solidify Cisco’s position in the marketplace and strengthen Cisco’s move into the server market. However, a Cisco-EMC merger is possible but it would be a “monster” of a deal to negotiate. It would cost roughly USD 35bn. Cisco would need to believe it was losing market share in its core routing and switching businesses to seriously consider it. The two companies would need to agree on amanagement succession plan and how to handle complications related to EMC’s VMWare ownership. On the other hand, in my opinion the two companies are close enough that a deal could occur at any point.

It is not likely that a Cisco acquisition of EMC would run into any antitrust issues in the US. US regulators have been pretty hands off in deals of this kind. However, given the recent Sun/Oracle obstacles the European environment is different and a potential acquisition might be of concern to European regulators.

Cisco has a market cap of USD 138bn and revenues of USD 36bn for the year ended July 2009. EMC’s market cap is USD 34.47bn and it had 2008 revenues of USD 14.9bn.

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Canon Wants to Close Océ deal by Christmas - Konica/Minolta Loosing Océ Alliance

The proposed takeover of Dutch Océ by Canon has been notified for merger clearance with the European Commission today, this newswire has learned. The deadline for the phase I investigation is 22 December, just before the EC shuts its offices for the Christmas break.

Today's notification is in line with the timetable given by an Océ representative talking to this newswire yesterday. The representative had said clearance is expected before Christmas. Independent lawyers noted however, that the review period would be extended by 10 working days if the companies needed to offer remedies in due course of the investigation. In such a scenario, a decision would not come before January 2010.

Two European independent competition lawyers and an economist advising in merger control investigations all thought that the deal was not likely to raise serious antitrust concerns. They also thought that sticking with the pre Christmas timeline for clearance was possible if the pre notification talks between the merging parties and the EC had reached an advanced stage already.

However even if the companies had only minor overlaps, as Canon and Océ claimed yesterday, the EC might want to look at several areas where anti-competitive effects might occur, the experts warned.

One aspect was the relationship between Océ, Konica and Minolta. Océ CEO Van Iperen had said yesterday that there was a small overlap, although very limited, but that Océ mostly sells Konica/Minolta products in that segment. “This is certainly a relevant aspect of the investigation,” one of the lawyers commented.

The experts did however highlight a number of potential outcomes of an investigation in this aspect. One of the lawyers suggested Océ/Canon might have to end the business relationship with Konica and Minolta, if the market test indicated anti-competitive effects of all companies acting together. He noted however that this was speculation and would depend on market shares. In some previous cases the EC had demanded termination of similar arrangements.

But the economist said an opposite conclusion could not be ruled out: He suggested the investigation could find that Konica and Minolta would be forced out of certain markets, if Canon did not wish to continue the business relationship by the two with Océ. In this case a remedy might be to guarantee continuation of the arrangement for a certain time, to give Konica and Minolta the opportunity to find an adequate partner to replace Océ.

Furthermore, both lawyers agreed, even if overlaps were small the EC might ask if the merging parties were potential new entrants in each other's market. But both lawyers considered this to be an unlikely problem. The first one said such an argument by the EC would have to be based on firm plans to enter those markets. The other lawyer questioned if Océ would have the financial power for such a move.

The economist highlighted that Canon is not planning redundancies at Océ after the takeover. “They try to position it as a complementary deal. And the fact that they do not expect job losses seems to confirm that. If there were large overlaps you would think they would integrate sales functions and those kind of operations,” he said.

The overall sentiment was that a phase I clearance was achievable, and getting it before Christmas would be possible if the parties had engaged in intensive conversations over the past few weeks. In this case the companies might have a very good idea of potential areas of concern, and could structure the deal at the initial phase I filing accordingly.

The Océ CEO had confirmed yesterday that pre notification talks with the European regulator had been under way already. The economist and the second lawyer both thought that the printing markets were likely to be European, and that a number of serious competitors were around while none of them holds a dominant position. All these were considered arguments indicating limited anti-competitive effects of a takeover of Océ by Canon.

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Monday, November 16, 2009

Canon to Acquire Océ for €730M

Canon bid for Oce today; This looks more like two drunk men trying to stand straight in the consolidating Office Products industry. Ricoh snapped up IKON which was about 40% of Canon's sales in the US - a major blow to Canon's core business which they let go. They then tried to compensate for it by teaming up with HP last September, to dangerously shift more of their business to HP.

Oce has long been on the block by its investors given they were unable to commercialize their technology by creating channel partnerships in the US and Europe given their "i know it all because i got the best technology and engineers" culture. Ricoh buying IKON was the latest blow to their channel in the US. HP with Xeikon, Xerox with Igen, Kodak with NexPress platform are far more ahead of Oce than they internally realize. I am posting the official announcement from Oce and Canon. I don't expect a white knight to come in because being far too conservative and slow, anyone else but Canon already lined up their production game plan...while Canon claims to have created "a global leader in printing industry", HP keeps buying services and software firms and Xerox has just made a $6B bid to acquire ACS to form a $10B services business....IKON/Ricoh claimed top spot in the core printing and copying domain while Xerox has transformed itself again to follow HP in the Business Process Outsourcing domain....again the story of two drunk men !!

Canon and Océ to create global leader in printing industry

Canon intends to acquire all ordinary shares of Océ through an all cash public offer

  • Canon and Océ aim to create the overall No. 1 presence in the printing industry;
  • Combination to capitalize on excellent complementary fit in product range, channel mix, R&D, and business lines resulting in an outstanding client offer;
  • Strong strategic rationale for Canon and Océ - growing and building on proven track record in innovation and client servicing;
  • 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;
  • The Management and Supervisory Boards of Océ fully and unanimously support and will recommend the intended Offer;
  • Holders of the depository receipts for Océ's cumulative preference shares, Ducatus, ASR and ING (approximately 19% of the total share capital), agreed to sell their interests to Canon; large shareholder Bestinver Gestion S.A. (approximately 9.5% of outstanding Shares) has provided an irrevocable undertaking to tender;
  • Océ remains separate legal entity as a Canon division, headquartered in Venlo (the Netherlands); Océ brand is to be maintained and applied in all relevant markets. Océ to lead its R&D and manufacturing. Management Board and key management remain in place;
  • Employees part of industry leader - existing labor agreements will be respected, no redundancies as a result of the Offer.

16 November 2009 - Canon and Océ today announced that they have reached conditional agreement to combine their printing activities through a fully self-funded, public cash offer by Canon for all the Shares of Océ. The offer price of € 8.60 per Share of Océ (the "Offer") represents a premium of 70% over the closing share price of Friday 13 November 2009 and 137% to the average closing price of Océ's Shares over the last 12 months. The Offer values 100% of the issued and outstanding Shares of Océ at approximately € 730 million.

Canon and Océ aim to create the overall No. 1 presence in the printing industry, building on an enhanced scale and a combined history of innovation and excellent client servicing. The combination will capitalize on an excellent complementary fit in product mix, channel mix, R&D, and business lines resulting in an outstanding client offer spanning the entire printing industry.

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."

Strategic rationale

Canon and Océ will be able to build upon each other's strong history and proven track record of innovation and customers servicing and create a strong joint enterprise capable of long term successes. The similar technology oriented background and corporate values will be important drivers creating the world's leading group in the printing industry.

Canon and Océ have similar backgrounds in corporate values with a client oriented culture and a technology driven business model. Océ, one of the world's leading providers of document management and printing for professionals, brings to the merger its expertise and strengths in the areas of production printing, wide format printing and business services. Océ's strategy focuses on strengthening its distribution power, increasing product competitiveness and improving operational excellence. The combination will provide Océ access to Canon's well-established sales and marketing network throughout Asia. Additionally, Océ will benefit from the Canon Group Best in Class processes and infrastructure as well as financing to facilitate active investment toward the expansion of Océ's business operations. The combination of Canon and Océ will have leading positions in the SOHO (Small Office/Home Office), office, production and wide format segments, offering a superlative range of products and services. It would be able to provide optimal customer servicing through its enhanced scale, innovative technologies and strong distribution networks. Océ and Canon have complementary technologies and products and would benefit from improved diversification across regions and businesses.

Under Phase III of its Excellent Global Corporation Plan, launched in 2006, Canon aims to join the ranks of the world's top 100 companies in terms of all key measures of business performance. As a principal strategy toward the realization of this goal, Canon aims to achieve the overwhelming No. 1 position worldwide in all of its current core businesses. Océ boasts a robust direct sales and service network in 32 countries, which will provide valuable additional sales and service support for Canon-brand products. Furthermore Canon will benefit from the addition of Océ's production and wide format printing line-up, along with the R&D synergies made possible through joint development initiatives in these areas.

The printing industry currently is in a period of consolidation, driven by the undeniable fact that scale is increasingly important, especially in R&D and manufacturing. Only players that are able to improve profitability through increased scale and Best in Class processes and infrastructure will play a leading role in the printing industry going forward. In this perspective, Canon and Océ form the ideal combination. Together they are excellently positioned to optimize the servicing of their customers and become the undisputed market leader.

Océ's position in the combination

Following the completion of the merger, Océ will remain a separate legal entity and will become a division within Canon with headquarters in Venlo (the Netherlands). Océ will be responsible worldwide for wide format, commercial printing and business services. Océ's office activities will be integrated in Canon's Office Imaging Products division ("OIP"). Canon's Large Format Printing will functionally be integrated in the Océ Production Printing Division ("Océ division") over time.

In order to create optimal scale in the right segments, the Océ division will report (managerial and financially) to the Canon Board and will lead the R&D and manufacturing for its businesses. Furthermore, Océ's headquarters, combining R&D, production and sales functions, is expected to play an integral role for Canon's European regional operations, one of Canon's key bases within its Three Regional Headquarters vision. The current Management Board and key management of Océ will remain in place. In the Océ division, the strong Océ brand name will be maintained and will be applied in all relevant markets.

Corporate governance

Following completion of the Offer the Management Board of the Océ division will consist of the following persons: Messrs. Van Iperen, Kerkhoven and Schaaf. Océ's Supervisory Board will include the following persons: Messrs. Tanaka, Elverding and Baan, as well as three additional persons to be selected among Canon's top executives.

Integration phase

The integration of both Canon and Océ businesses will take place over the coming 3 years. Canon and Océ have agreed on a high level integration plan and integration project organization. The integration will be aimed to optimize efficient coordination of Sales, Service, Marketing, R&D and Manufacturing & Logistics covering all business areas, the process of which will be directed and supervised by a Steering Committee composed of executives from Canon and Océ. The Sales and Service integration will be led by joint integration teams per region with initially two dedicated organizations, respectively for the OIP and for the Océ division.

Social aspects

The Océ employees will become part of a global leader in the printing industry which will capitalize on the strong brands of both companies. Océ and Canon do not expect that there shall be any material negative consequences as a result of the Offer for the existing employment level of Océ, excluding already announced personnel reductions. The combination will respect the existing rights of the employees of Océ, including applicable covenants with the Océ works councils and the unions, the applicable social plans and collective labor agreements. The combination will also respect the current obligations with respect to the pension rights of Océ's employees.


The customers of both Canon and Océ will benefit from an enlarged range of high quality products and services through an extended global sales and service network.

Business Partners

Océ will carefully explore with its various business partners the future of their relationship in view of the contemplated transaction.

Financial highlights of the Offer

Canon intends to acquire all the outstanding Shares of Océ through a fully self-funded cash offer consisting of € 8.60 in cash per ordinary Océ Share, representing:

  • a 70 % premium over Océ closing price on Friday 13 November 2009;
  • a 137 % premium over Océ's average twelve months share price.

No further dividends are expected to be declared prior to the completion of this Offer.

Committed Shareholders

Bestinver Gestion S.A. SGIIC, a holder of approximately 9.5% of the outstanding Shares, has committed itself to tender its Shares under the intended Offer when it is made. The irrevocable contains certain customary undertakings and conditions including that the shareholder will only tender its Shares to a bona fide third party offeror at a price of at least 10% above the Offer. Canon will have the right to match any competing offer.

Ducatus N.V., ASR Nederland N.V. and ING AM Insurance Companies B.V., each holder of depository receipts for cumulative preference shares in Océ and Stichting Administratiekantoor Preferente Aandelen Océ, which holds on their behalves all the cumulative preference shares representing in aggregate approximately 19% of Océ's voting rights, have entered into a conditional agreement with Canon to transfer their depository receipts and cumulative preference shares, respectively, on the condition of the Offer being declared unconditional.


The Management and Supervisory Boards of Océ fully and unanimously support the transaction with Canon, after giving due consideration to the strategic, financial and social aspects of the transaction and taking into account the interest of the shareholders and all other stakeholders of Océ, including clients and employees. The Management and Supervisory Boards of Océ will recommend to the shareholders that they accept the Offer.

Financing of the Offer

The cash consideration of the Offer is € 730 million, based on a 100% acceptance of Océ's ordinary shareholders. The cash consideration for depository receipts for cumulative preference shares amounts to € 65 million. Canon intends to refinance short and long term debt of Océ, as needed. As per 31 August 2009, the total amount of short and long term debt amounted to € 704 million. Canon will finance the Offer and debt repayment from internally generated funds.

Offer Conditions and Process

The Offer will commence after the formal filing with the AFM (Dutch Authority Financial Markets) of an Offering Memorandum. The commencement of the Offer is subject to the satisfaction of certain pre-offer conditions customary for a transaction of this kind, such as (i) relevant antitrust clearances for the Offer, (ii) no revocation of the recommendation by Océ's Management Board or Supervisory Board, (iii) no revocation of the agreements with the Committed Shareholders, (iv) no competing offer having been made, (v) no order, stay judgment or decree restraining, prohibiting or delaying the transaction, (vi) agreement on and AFM approval of the Offering Memorandum, (vii) no material breach of the merger protocol and (viii) no material adverse change having occurred.

When made, the consummation of the Offer will be subject to the satisfaction or waiver of certain offer conditions customary for transactions of this kind, such as (i) a minimum acceptance of 85% of the Shares on a fully diluted basis, (ii) no revocation of the recommendation by Océ's Management Board and Supervisory Board, (iii) no revocation of the agreements with the Committed Shareholders, (iv) no competing offer having been made, (v) no order, stay judgment or decree restraining, prohibiting or delaying the transaction, (vi) no material breach of the merger protocol and (vii) no material adverse change having occurred.

Océ may terminate the conditional agreement with Canon in the event that a bona fide third party makes an offer which is, in the reasonable opinion of Océ's Management Board and Supervisory Boards, superior to the Offer. An alternative offer shall only be regarded as superior in the event its bid price exceeds the Offer price by 10%, or in the event of a consecutive bid by 5%. Canon has a right to match a superior offer. In the event the conditional agreement is terminated pursuant to a competing offer, Océ shall pay to Canon an amount of € 7,950,000 as compensation for opportunity costs and other costs incurred by Canon.

The relevant bodies and authorities (such as the relevant employee representative bodies, the AFM, the Social Economic Council and the relevant antitrust authorities) have been or will be informed and/or consulted (as applicable), as customary in a transaction of this kind.

If the Offer is declared unconditional, it is intended that Océ's listing on the Official Market of NYSE Euronext Amsterdam N.V. will be terminated as soon as possible.

In the event that the Offer is declared unconditional and less than 95% of the Shares is acquired, Canon may utilize available legal measures (for example a legal merger and squeeze out) in order to increase their ownership to 100% of the total share capital of Océ.

Expected timing

  • The Offering Memorandum is expected to be published and the Offer is expected to commence in the first quarter of 2010;
  • Following the publication of the Offering Memorandum, Océ will convene an extraordinary general meeting of shareholders to inform its shareholders about the Offer and to approve certain customary resolutions that are to be adopted as a condition to the Offer;
  • The settlement date is to be determined.
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Who Will Acquire Open Text (OTEX)?

Open Text (Nasdaq: OTEX), a provider of enterprise management software, is being seen as a potential takeover target for one of its partners, according to a report in BusinessWeek.

The magazine, in Gene Marcial's Inside Wall Street column, citing Richard Parower, an analyst with Seligman Investments, and other analysts, reported that the company could become a takeover target for SAP, Microsoft or Oracle, all of whom partner with Open Text. The Waterloo, Ontario-based company has a market capitalization of USD 2.2bn. Open text recently bought Vignette in an effort to consolidate the ECM industry while trying to reach a $1B mark as the last standing independent supplier. In my opinion, SAP would make it virtually impossible to let Open Text snapped up by a competitor.

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