Lexmark International (LXK) in Acquisition Talks With Chinese Firm Apex Technology

Shares of Lexmark International Inc. (LXK) were up +1.30 or +4.00 percent to $33.81 in Thursday’s premarket after news early this morning that the company was in negotiations to be acquired by Apex Technology Co Ltd. Lexmark International stock closed at $32.51, up +0.49 or +1.53 percent in Wednesday’s regular trading session.


Stock Analysis

Lexington, Kentucky based Lexmark International Inc. was originally formed after IBM divested its hardware manufacturing facilities in 1991.
The sale included its printer and printer supply business, which it sold to Clayton, Dubilier & Rice Inc. in a leveraged buyout. Lexmark then had its initial public offering in 1995.

Lexmark specializes in manufacturing imaging systems, laser printers and toner, as well as providing document management systems, business process management and managed print services for businesses all over the world. The company employs approximately 12,500 people and has research and development facilities in California, Colorado, Kansas, the Philippines, India, Germany and Sweden with sales offices in North and South America, Europe, Asia and Africa.

Founded in 2004, Zhuhai, China-based Apex Technology Co, Ltd is designer, manufacturer and marketer of laserjet and inkjet cartridge chips for distributors and remanufacturers. The company’s main products include inkjet chips, laserjet chips, toner cartridge components, drums, toners and copier chips to name just a partial list of Apex’s printer and printing related supplies. The company distributes its products in China, Uruguay and internationally through branches in the United States, the Netherlands, Taiwan and Shanghai.

According to sources which asked to remain anonymous due to the confidentiality of the negotiations, the two companies are in negotiations, but that no deal has been reached. Lexmark International declined to comment on the matter, while representatives of Apex did not respond when asked to comment.

Last October, Lexmark announced that it was exploring strategic alternatives — including the sale of the company — hiring Goldman Sachs Group Inc. (GS) to advise them. The company has been struggling as its corporate customers cut costs and consumers begin using mobile alternatives rather than personal computers.

Lexmark has been expanding by taking over other companies, buying Kofax Ltd for approximately $1 billion last year and Swedish based ReadSoft for $251 million in 2014. For its part, Apex, which owns the Ninestar and Seine brands bought U.S.-based components manufacturer Static Control Components last year.

The combination of an Original Equipment Manufacturer or OEM such as Lexmark with Apex, which is a leading supplier of aftermarket products, could be a major development in the printer and related businesses. Other firms have reportedly expressed interest in possibly acquiring Lexmark, with Lenovo being a possible suitor, while Ricoh or Canon possibly buying Lexmark’s hardware business. A printer publication, “The Recycler” reported earlier this month that Lexmark had already received initial bids for its software unit. Lexmark stock is trading higher due to the rumors, nevertheless, no confirmation of a deal has been released.

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Published on Apr 7, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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