Lexmark commences tender offer for all outstanding shares of ReadSoft
The combination of ReadSoft and Perceptive Software will enhance The ability to create solutions that manage the ever-expanding forms of content, from traditional hard copy documents to mobile video and audio in today’s digital business environment.
Lexmark International, Inc. (NYSE: LXK) today announced the commencement of a cash tender offer for all of the outstanding shares of Sweden-based ReadSoft (NASDAQ OMX: RSOF-B). The offer is $6.11 in cash for each Series A and Series B share of ReadSoft for a price of approximately $182 million, net of cash acquired1. ReadSoft’s Board of Directors has unanimously recommended in favor of Lexmark’s tender offer, and it is also supported by ReadSoft’s two largest shareholders.
Upon successful completion of the tender offer, ReadSoft will be combined with Lexmark’s Perceptive Software. With the addition of ReadSoft, Perceptive Software will significantly grow its software presence with additional document process automation capabilities and the expansion of its footprint in Europe.
ReadSoft’s technology and market presence will also complement Lexmark’s Perceptive Software, strengthening its position as a leading provider of intelligent data capture software solutions for back office processes.
ReadSoft is a leading global provider of software solutions that automate business processes, both on premise and in the cloud. Its software captures, classifies, sorts and routes both hard copy and digital business documents, provides approval workflows, and automatically extracts and verifies relevant data before depositing it into a customer’s systems of record.
ReadSoft is recognized in the industry for its strong integrations with leading ERP systems such as SAP and Oracle, for applications that include invoice processing, accounts payable automation and sales order processing. Its software also automates a wide variety of business processes that include claims, applications, and questionnaire processing across a number of targeted industry segments.
ReadSoft has over 12,000 customers worldwide, operates in 70 countries and has more than 350 channel partners. ReadSoft also has many enterprise customers diversified across multiple industries, including manufacturing, retail, banking and insurance, and the public sector. Well-known enterprise customers include BASF, Siemens, Bosch, HSBC Bank, ING, Lego and John Deere.
ReadSoft was founded in 1991 and has approximately 625 employees. The company is headquartered in Helsingborg, Sweden. Its full year 2013 revenue was approximately $1172 million.
Completion of the tender offer is contingent upon acceptance by ReadSoft shareholders representing more than 90 percent of the total number of outstanding shares of ReadSoft, applicable regulatory clearances and other customary closing conditions. The tender offer is expected to close in the second quarter of 2014.
This tender offer for the shares of ReadSoft demonstrates the consistent execution of Lexmark’s capital allocation framework, which is to pursue acquisitions that strengthen and support the growth of Lexmark solutions capabilities, while returning more than 50 percent of free cash flow to shareholders, on average, through quarterly dividends and share repurchases. Since the first quarter of 2011, Lexmark has returned to shareholders $733 million in the form of dividends and share repurchases.
Supporting Quotes:
“Our tender offer for the shares of ReadSoft supports Lexmark’s ongoing strategy of building our high value solutions that help our customers manage their unstructured information challenges,” said Paul Rooke, Lexmark chairman and chief executive officer. “The combination of ReadSoft and Perceptive Software will enhance our ability to create solutions that manage the ever-expanding forms of content, from traditional hard copy documents to mobile video and audio in today’s digital business environment.
“The two companies are both strategically focused on developing industry-specific solutions, creating synergies that will help us develop unique offerings for our customers to capture, manage and access their information more efficiently,” Rooke added.
“The ReadSoft team has built strong capture and business process technologies that are used by organizations around the world, particularly in Europe,” said Scott Coons, Perceptive Software president and chief executive officer and Lexmark vice president. “ReadSoft will join Perceptive Software’s global team of process and content management experts, while its leadership in the European market will further strengthen Perceptive Software’s global footprint.”
“The Board of Directors of ReadSoft has carefully considered the offer and views Lexmark as an excellent owner committed to the further development of ReadSoft’s business, and has therefore decided to recommend the shareholders to accept the tender offer from Lexmark,” said Göran Larsson, chairman of the board of ReadSoft.
Initial Xamcor Comments:
This blockbuster offer certainly validates the continued consolidation we are seeing in the Information Management marketplace. Since its inception in 1991, ReadSoft has been a leading company in the Capture area of the ECM marketplace, and has successfully developed solutions sold across the globe. Since its acquisition by Lexmark several years ago, Perceptive Software has grown aggressively through acquisition and has added the solutions necessary to allow it to compete on a global scale. The combination of ReadSoft and Lexmark/Perceptive further solidifies the ability of Perceptive to deliver quality solutions throughout the world, offering a full and robust suite for many user needs.
This deal was all about expectations. ReadSoft has struggled lately, and had a very poor 2013. Revenue in 2013 was $117.1M and EBITDA was 2.6%, down from 8.1% in 2012 and 11.2% in 2011. Sales growth in 2013 was a negative 2.6%. All in all the market saw ReadSoft as a declining company. Lexmark offered their shareholders an attractive premium of 117%; that is very hard to ignore! Best yet for Lexmark, this deal was funded from non-US cash funds, which were a result of selling their Ink Jet business. For an all cash price of $182M Lexmark doesn’t dilute their stock and gains some important assets, including:
- Access to a very strong customer base in Europe – ReadSoft has over 12,000 customers, with 70% of ReadSoft’s revenue in 2013 coming from Europe. This could provide Perceptive with a base in excess 8000 customers, many of which may not now be Perceptive customers. With its prior acquisitions of Pallas Athena and Saperion, Perceptive has turned a regional weakness into a strength;
- Acquisition of many top enterprise accounts and Fortune 1000 accounts which ReadSoft does a good deal of business with;
- Acquisition of solid capture and complimentary technologies – ReadSoft technology is proven around the world and has had strong success in the Accounts Payable area. In addition, it has been selling more advanced Business Process Automation solutions, after acquiring Foxray in 2011;
- A broader capture platform which can be used in many markets, from SMB through large enterprises.
One looming question revolves around how the ReadSoft acquisition will play with Perceptive’s current Brainware platform. Brainware, while a solid solution, can also be a complex solution. It really did not tightly aligned with the Perceptive philosophy of get in fast, install quickly, get the customer up and running in the shortest time possible, and move to the next opportunity. The ReadSoft products should fit the traditional Perceptive approach very well.
This appears to be a very positive acquisition and one that clearly places Perceptive Software among the leaders in Information Management. Moreover, the ReadSoft solutions will also benefit Lexmark and add value to its Print Services solutions and other value added areas.
In addition, in following Lexmark and Perceptive for the last decade, it sets a very positive model for growth and for the ability of hardware and software providers to join together and form an organization with greater overall value. Lexmark has given Perceptive all the tools and capabilities they need to succeed through the many acquisitions they have made. However they have also given Perceptive the freedom to grow and succeed. CEO Paul Rooke of Lexmark, and Scott Coons of Perceptive, seem to be on the same page and effective in pursuing growth and increased earnings.