Ricoh to Buy Ikon Office Solutions for $1.6 Billion (Update2)
 

By Courtney Dentch

Aug. 27 (Bloomberg) -- Ricoh Co., Japan's second-largest maker of office equipment, agreed to buy Ikon Office Solutions Inc. for $1.62 billion in cash to expand its sales and services operations in the U.S.

Ricoh offered to pay $17.25 a share, Malvern, Pennsylvania- based Ikon said in a statement today. That's an 11 percent premium over Ikon's closing price of $15.56 yesterday.

The deal adds Ikon's 400 sales locations in the U.S., Canada and Western Europe to Ricoh's primarily Japan-based business. The Asian nation accounted for 46 percent of Ricoh's revenue of 2.22 trillion yen ($20.2 billion) last year. The acquisition takes the last independent printer distributor in North America off the market after Global Imaging Systems Inc. and the U.S. unit of Danka Business Systems Plc were bought in the last 18 months.

``It's a reasonable price,'' said Shannon Cross, an analyst with Cross Research in Livingston, New Jersey. She rates Ikon a ``buy.'' ``Ricoh gets an expanded U.S. distribution network. There's not another asset like it anymore.''

Ikon got 87 percent of its 2007 sales of $4.17 billion from North America. The deal is expected to close in the fourth quarter and will be financed with a mix of internal and external funding, Tokyo-based Ricoh said.

Ikon rose $1.43, or 9.2 percent, to $16.99 at 10:18 a.m. in New York Stock Exchange composite trading, the biggest increase since April 10. Ricoh fell 1.6 percent to 1,727 yen on the Tokyo Stock Exchange.

Canon

Ikon eliminated about 350 jobs in January to trim costs after first-quarter profit fell 45 percent. The company has also reduced executive bonuses as sales fell for 11 straight periods through the third quarter of 2007.

Canon Inc., the largest Japanese office equipment maker, has lost about 50 percent of its U.S. distribution network as the distributors have been bought by printer makers. Xerox Corp. bought Global Imaging Systems for $1.67 billion last May to expand its small- and mid-sized business sales. Konica Minolta Holdings Inc. bought London-based Danka's U.S. unit for $240 million in June.

``The biggest question is what Canon's response will be,'' said Cross. ``Does another bidder emerge?'' Canon spokeswoman Patricia Hall declined to comment.

Ikon, the largest U.S. distributor of Canon and Ricoh copiers, is being advised by Goldman, Sachs & Co., while Morgan Stanley is advising Ricoh.

To contact the reporter on this story: Courtney Dentch in New York at cdentch1@bloomberg.net.