An American Printer Commentary
By Andy & Julie Plata
Co-CEOs, the OutputLinks Communications Group
An affiliate of private equity firm, Siris Capital Group, announced an all-cash agreement to buy EFI at $37 a share on April 15, 2019.
The $1.7 billion offer (which included debt assumption) represents a 45% premium over the past 90 days’ average stock price and a 25.8% premium over the $29.40 Friday closing price. However, as of April 22, the stock is trading at $37.22, which is already more than the offer Siris’ offering price.
Question: Since this was structured as a financial versus a strategic acquisition and with Q4’s revenue slide on ½ of EFI’s business - why such a high, all-cash, valuation over the 6-month average stock price?
Frank Baker, a Siris Co-Founder and Managing Partner, says: “EFI is at the forefront of the digital transition in the imaging and print industry, underpinned by a strong software heritage and culture of innovation. We believe that, by partnering with Siris, EFI will be well positioned to capture this transformational opportunity associated with increased digital inkjet penetration, industrial automation and software enablement. We are eager to partner with management to help the Company achieve its strategic objectives.”
Al Zollar, a Siris Executive Partner, says: “EFI has a 30-year legacy of leadership in the digital imaging market, with strong brand equity and a rich history of pioneering innovative solutions for its customers. The Company’s portfolio of mission-critical products and services are united by a common thread of impressive technological enablement and software integration. I look forward to supporting EFI’s strong team to help the Company anticipate evolving customer needs and drive new opportunities for innovation and growth.”
Siris is a leading private equity firm focused on investing and driving value creation in technology companies that provide mission-critical solutions and are facing technology transitions.
The "Go-Shop" provision
If the transaction is approved by EFI’s shareholders, the sale will be completed by the end of September. However, the acquisition offer includes a 45-day "go-shop" period. Therefore, before May 30, EFI can entertain competing bids.
The "go-shop" provision provides an interesting scenario as the stock is already trading higher than Siris’ bid.
After only one week, the stock was trading at $37.50 - almost $23,000,000 more than Siris’ offering price.
QUESTION: Will shareholders feel the Siris offer is too low?
If another organization submits a better offer to EFI, what happens next?
- Siris could either pay more or EFI would be sold to the higher bidder.
- If a higher bidder were chosen, Siris would earn a $25 million termination fee.
Siris’ Technology Buyout Fund
Siris’ Technology Buyout Fund was the vehicle for the EFI offer.
This acquisition will be Siris’ first foray into the world of print and packaging. It seems that print/packaging is a target for private equity investments over the past few years. It will be interesting to see if Siris attempts to leverage its EFI acquisition by buying one or more print-related companies in the near future.
Currently, no changes in EFI’s structure or organization are expected.
|Watch future editions for continuing coverage of the EFI acquisition and its effect on clients, employees and shareholders.|
Representing Siris in the transaction:
- RBC Capital Markets, KKR Capital Markets LLC, Deutsche Bank Securities Inc, Barclays, Credit Suisse, and Macquarie Capital provided debt financing;
- Sidley Austin LLP served as corporate counsel;
- Kirkland & Ellis LLP served as financing counsel;
- RBC Capital Markets served as M&A adviser to Siris.
Representing EFI in the transaction:
- O’Melveny provided legal services;
- Morgan Stanley and Greenhill served as financial advisers.
Thank you for reading. We hope our impressions of Siris’ offer to acquire EFI are of value to your business objectives.
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Promoting print-tec for the digital age,
Andy & Julie Plata
Co-CEOs, American Printer and the OutputLinks Communications Group
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