(Adds analyst comments, closing market prices.)
By Juro Osawa
Of DOW JONES NEWSWIRES
TOKYO -(Dow Jones)- Office products maker Ricoh Co. (7752.TO) stole a march on much larger rival Canon Inc. (7751.TO) Thursday with its $1.6-billion purchase of U.S. company Ikon Office Solutions (IKN), news that lifted Ricoh shares as much as 6.8% intraday.
Shares of Canon, Ikon's biggest client, tumbled as players viewed the deal as denting Canon's prospects in the U.S. Although Ricoh gave up much of its gains, it still closed up 2.9% at Y1,777, outperforming a 0.1% rise in the Nikkei 225 Stock Average.
Canon shed 5.4% to close at Y4,790. That values the company at about Y6.4 trillion, nearly five times Ricoh's Y1.3 trillion market capitalization.
Ricoh said late Wednesday it will buy Pennsylvania-based Ikon, which sells office products and services, to strengthen its business in North America and Europe. The deal is the latest in the growing list of Japanese firms acquiring overseas businesses to secure growth in light of a contracting domestic economy.
"This is a good deal for Ricoh," said Lehman Brothers analyst Keiji Takeda. The acquisition "will immediately increase (Ricoh's) overseas distribution, direct sales,"and its presence as a service provider for large companies with their own printing departments.
Ikon supplies many Fortune 500 companies and Ricoh paid a fair price, he added.
Takeda kept his rating on Ricoh shares unchanged at "Overweight" with a 12-18 month price target of Y2,030.
Credit rating firm Standard & Poor's said that Ricoh "would be able to maintain and even strengthen its competitive position in the maturing U.S. and European markets following the planned acquisition."
Although Ricoh is likely to finance the bulk of the acquisition cost through external funding, S&P said the deal won't affect Ricoh's credit ratings. It added that it expects Ricoh's financial profile to recover in about three years.
Lehman's Takeda said the acquisition does involve some risk given Ikon's dependence on Canon.
The latter's products represent about 60% of Ikon's equipment sales, while Ricoh accounts for roughly 30%. "The deal's ultimate success may depend on how smoothly Ricoh can manage its relationship with (Canon)," Takeda said in his report.
Others said the deal poses more risks for Canon.
Although it may take a few years for the move to create synergy, "the acquisition gives a positive impression that Ricoh is taking an offensive stance at a time when most players in the sector, like Canon, are focusing on cost cuts and other defensive measures," said Mizuho Investors Securities analyst Nobuo Kurahashi, who doesn't assign ratings for either Ricoh or Canon.
"The news was a negative shock to Canon as it will likely significantly affect its (North American) sales," said JP Morgan analyst Hisashi Moriyama, who slashed his share price target for Canon to Y5,100 from Y5,600.
The announcement of the deal sent shares of Ikon more than 9% higher on Wall Street Wednesday.
Ikon finished up $1.42 at $16.98, after setting a 52-week high at $17.23 earlier in the session.
Ricoh's move takes the value of cross-border outbound mergers and acquisitions by Japanese companies to $42.1 billion so far this year, up about fourfold from the same period last year and already approaching the full-year record of $44.2 billion set in 2006, according to Thomson Reuters.
Late last month, components maker TDK Corp. (6762.TO) announced a EUR1.4 billion plan to acquire German electronic parts maker Epcos AG (EPC.XE).
-By Juro Osawa, Dow Jones Newswires; 813-5255-2929; juro.osawa@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=CDxCAp3sEgCl%2B%2BFOYHhCsg%3D%3D. You can use this link on the day this article is published and the following day.
By Juro Osawa
Of DOW JONES NEWSWIRES
TOKYO -(Dow Jones)- Office products maker Ricoh Co. (7752.TO) stole a march on much larger rival Canon Inc. (7751.TO) Thursday with its $1.6-billion purchase of U.S. company Ikon Office Solutions (IKN), news that lifted Ricoh shares as much as 6.8% intraday.
Shares of Canon, Ikon's biggest client, tumbled as players viewed the deal as denting Canon's prospects in the U.S. Although Ricoh gave up much of its gains, it still closed up 2.9% at Y1,777, outperforming a 0.1% rise in the Nikkei 225 Stock Average.
Canon shed 5.4% to close at Y4,790. That values the company at about Y6.4 trillion, nearly five times Ricoh's Y1.3 trillion market capitalization.
Ricoh said late Wednesday it will buy Pennsylvania-based Ikon, which sells office products and services, to strengthen its business in North America and Europe. The deal is the latest in the growing list of Japanese firms acquiring overseas businesses to secure growth in light of a contracting domestic economy.
"This is a good deal for Ricoh," said Lehman Brothers analyst Keiji Takeda. The acquisition "will immediately increase (Ricoh's) overseas distribution, direct sales,"and its presence as a service provider for large companies with their own printing departments.
Ikon supplies many Fortune 500 companies and Ricoh paid a fair price, he added.
Takeda kept his rating on Ricoh shares unchanged at "Overweight" with a 12-18 month price target of Y2,030.
Credit rating firm Standard & Poor's said that Ricoh "would be able to maintain and even strengthen its competitive position in the maturing U.S. and European markets following the planned acquisition."
Although Ricoh is likely to finance the bulk of the acquisition cost through external funding, S&P said the deal won't affect Ricoh's credit ratings. It added that it expects Ricoh's financial profile to recover in about three years.
Lehman's Takeda said the acquisition does involve some risk given Ikon's dependence on Canon.
The latter's products represent about 60% of Ikon's equipment sales, while Ricoh accounts for roughly 30%. "The deal's ultimate success may depend on how smoothly Ricoh can manage its relationship with (Canon)," Takeda said in his report.
Others said the deal poses more risks for Canon.
Although it may take a few years for the move to create synergy, "the acquisition gives a positive impression that Ricoh is taking an offensive stance at a time when most players in the sector, like Canon, are focusing on cost cuts and other defensive measures," said Mizuho Investors Securities analyst Nobuo Kurahashi, who doesn't assign ratings for either Ricoh or Canon.
"The news was a negative shock to Canon as it will likely significantly affect its (North American) sales," said JP Morgan analyst Hisashi Moriyama, who slashed his share price target for Canon to Y5,100 from Y5,600.
The announcement of the deal sent shares of Ikon more than 9% higher on Wall Street Wednesday.
Ikon finished up $1.42 at $16.98, after setting a 52-week high at $17.23 earlier in the session.
Ricoh's move takes the value of cross-border outbound mergers and acquisitions by Japanese companies to $42.1 billion so far this year, up about fourfold from the same period last year and already approaching the full-year record of $44.2 billion set in 2006, according to Thomson Reuters.
Late last month, components maker TDK Corp. (6762.TO) announced a EUR1.4 billion plan to acquire German electronic parts maker Epcos AG (EPC.XE).
-By Juro Osawa, Dow Jones Newswires; 813-5255-2929; juro.osawa@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=CDxCAp3sEgCl%2B%2BFOYHhCsg%3D%3D. You can use this link on the day this article is published and the following day.
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