LEXINGTON, Ky. & IRVINE, Calif. (March 24, 2015) – Lexmark International executives late Tuesday afternoon unveiled a deal expected to double the company’s software business by acquiring Irvine, Calif.-based data services provider Kofax Limited for $1 billion.
The two companies have entered into a merger agreement in which Lexmark will acquire all of the outstanding shares of Kofax for $11.00 per share in cash for a total enterprise value of approximately $1 billion, net of cash acquired.
Lexmark shares were up 5 percent in morning trading at $42.96.
Lexmark began in 1991 as an IBM hardware spinoff in the printer market and went public in 1995. Today it has $3.7 billion in annual revenues and more than 13,000 employees worldwide. Its headquarters and main research and development operations are in Lexington with additional R&D and manufacturing facilities in Boulder, Colo.; Lenexa, Kan.; Cebu, Philippines; and Kolkata, West Bengal, India. Its Perceptive Software business develops printing solutions and services for multifunction printers and applications to simplify traditional manual paper processes. Lexmark has offices throughout North and South America, Asia, Africa and Europe.
Founded in 1985, Kofax reported 2014 revenue of $297 million. It has over 20,000 customers worldwide, including 80 on the Fortune Global 100 list, and operates in all regions of the world with more than 850 channel partners.
“The acquisition of Kofax enhances our best-in-class offerings so our customers can capture, manage, access, and act upon their information more efficiently, and extends Lexmark into the high-growth smart process applications market,” said Paul Rooke, Lexmark chairman and CEO. “Our customers will have a breadth of hardware and software solutions that connect their information silos and automate their business processes – enabling them to access the most relevant information at the moment they need it to drive business forward.”
Upon successful completion of the acquisition, Lexmark will increase its enterprise software business by 75 percent to approximately $700 million in business and improve its position in an expanding $10 billion content and process management software sector. Lexmark expects around 10 percent compounded annual growth in this market. Kofax will significantly increase Lexmark’s scale, accelerate growth and increase software business operating margins.
Kofax enhances Lexmark’s enterprise content management and business process management offerings. In information and date capture, the company said, the combination of Kofax’s smart process applications with Perceptive Intelligent Capture will create the broadest and deepest portfolio of capture solutions in the market, ranging from Web portals and mobile devices to smart MFPs.Lexmark will fund the acquisition with its non-U.S. cash on hand and its existing credit facility programs.
“Kofax accelerates Lexmark’s development of industry-specific solutions while also immediately expanding our reach into the midmarket, where there is increasing demand for technology to better manage the growing amount of unstructured information and improve customer engagement,” Rooke said.
Kofax’s board of directors unanimously recommended in favor of the deal, and Kofax shareholders holding approximately 25 percent of outstanding shares have signed an agreement to support the merger.
The deal will enhance Lexmark’s balance sheet by deploying overseas cash, according to a company news release on the acquisition.
Kofax describes itself as “a leading provider of smart process applications to simplify and transform the First Mile™ of customer engagement. Success in the First Mile can dramatically improve the customer experience, greatly reduce operating costs and increase competitiveness, growth and profitability.”
The Kofax transaction fits into Lexmark’s stated capital allocation strategy, which is to pursue acquisitions that strengthen and support the growth of Lexmark’s solutions capabilities, while returning capital to shareholders. Since the first quarter of 2011, Lexmark has returned 78 percent of its free cash flow to shareholders through dividends and share repurchases. The transaction will not impact Lexmark’s quarterly dividend.
The acquisition is expected to close in the second quarter of 2015 and is contingent on Kofax shareholder approval, applicable regulatory clearances and other customary closing conditions.
Goldman, Sachs and Co. is serving as exclusive financial advisor to Lexmark. Lazard is serving as exclusive financial advisor to Kofax on this transaction.