Oct 03, 2007RFID and bar-code label manufacturer Printronix is being acquired by Vector Capital, a private equity firm based in San Francisco, at a price of $108 million. The deal will close at the end of the year, Printronix's president and CEO, Robert Kleist, announced at a news conference yesterday. Vector Capital specializes in buyouts, spinouts and recapitalizations of established technology businesses.
At the news conference, Kleist revealed the company had organized a committee of independent directors representing shareholders that had been examining acquisition opportunities for the past two years. The committee ultimately recommended the sale to Vector Capital, he said, adding, "The board of directors is acting on unanimous committee approval." Shares were priced at $16 apiece, representing an 18.3 percent premium over the closing price of Printronix shares on Oct. 1.
Vector Capital previously owned RFID systems provider Savi Technology, which it sold to Lockheed Martin in 2006. "Their experience with Savi was very impressive," says David Sakai, Printronix's senior vice president of worldwide marketing. In 2006, Vector sold business software provider LANDesk Group to Avocent for $416 million. Given Vector's record, Sakai says, he has high hopes for Printronix and its products. "I'm very excited about the outlook for RFID."
On the other hand, Kleist said at the news conference, RFID adoption has not met expectations to date, indicating the technology is still generally in the piloting phase, and that there has not been the rapid acceleration some industry watchers may have anticipated. "RFID in the supply chain has not met the industry's expectations for growth," he stated. "Our RFID revenue has plateaued. The acceleration of the Wal-Mart market has not been what was hoped."
The day after the conference, Sakai explained that sales of Printronix's RFID hardware is seeing growth in the produce market and government sector, as well as in closed-loop supply chain applications. "RFID got off to a pretty good start and then leveled off," Sakai says. "However, we are still continuing to do pilots, continuing to do testing."
Printronix does not break out sales of its RFID products, but instead includes RFID-related revenue as part of its thermal-printing technology business. In fiscal year 2007, thermal-printing technology accounted for 19.1 percent of annual sales, or $24.5 million, representing an increase of 5.6 percent over fiscal year 2006.
Some analysts attending the conference questioned the timing of the acquisition, as the credit market is currently down, as is the level of enthusiasm for RFID technology. In addition, several deemed the sales price for the acquisition a disappointment. One analyst argued that with $18 million in available cash and existing real estate values in Irvine, Calif., where Printronix has its headquarters, the price tag is dissatisfying low for shareholders. Analysts also expressed dismay that Printronix would sell to a private firm at a time when enthusiasm for RFID technology had reached what Kleist called a plateau. These experts queried whether the committee had considered a management change as an alternate option—a practice common for companies with declining profits. Kleist indicated that he did not know such details.
"This was a rigorous process we went through over a protracted period of time," Harwood told conference attendees. He and Kleist said results from the second quarter of 2007 were not yet available but would be prior to closing. Printronix reported $128.4 million in revenue for the 2006 fiscal year.
Kleist, who is also the public company's largest shareholder, said he will continue his own position at the helm, and that Printronix will continue its product line as it had before. "As a private corporation, Printronix will remain committed to its customers," he stated, indicating he will retain 9.9 percent collective ownership of the firm with other senior executives.
According to Kleist, Vector and Printronix arrived at the details of the acquisition through negotiation. "This was not the only opportunity we looked at," Kleist said. Still, he added, "We thought it was the best one." Vector Capital will pay for the acquisition with its own equity, as well as financing from an unnamed bank. The details will be filed with the Securities and Exchange Commission (SEC) in about two weeks, Kleist says, and will be available at the SEC Web site.
