EFI announced on Thursday, April 14th, after the market close, that it has signed an agreement to acquire privately held VUTEk, Inc., the market share leading provider of superwide format digital inkjet printers, for approximately $281 million in cash.  EFI expects the transaction to close early in the third quarter of 2005, subject to regulatory approval.  The acquisition is expected to be immediately accretive upon closing, adding approximately $72 million in revenue and $0.11 in pro forma diluted earnings per share in the second half of 2005.

For printers to survive and prosper in an age where print is no longer the default medium for business communications, they must expand their range of offerings and build new revenue streams.  To do this, they must transform their operations from analog to digital in nearly every respect.  EFI has positioned itself as a company with a mission to help printers effect the analog-to-digital transformation and has set about building a product portfolio that aligns with that mission, from front-end workflow, to its Fiery family of RIPs to proofing and MIS.  By adding market-leading VUTEk grand format solutions to that portfolio, EFI offers its customers another important revenue stream and a means to capture greater share of customer as they strive for market differentiation.  At the same time, this move balances EFI's mix of direct/OEM/channel sales revenue and introduces a new level of recurring revenue in the form of consumables and services that will work to balance EFI's sometimes volatile financial performance.

VUTEk currently has over 1,400 grand format print engines installed in 90 countries. The company is now installing them at the rate of over 400 per year, with about 70% of volume through direct sales, with the remaining 30% placed through OEMs and other channel partners. Prices range from $100,000 to $350,000, with engines consuming about twice their purchase price in ink over their four- to five-year lifetime. About 30% of the company’s revenue is generated via ink sales and another 10% from service revenues. VUTEk’s blended gross margins for ink, service and equipment are at about 50%. For EFI, this adds a significant, profitable, recurring revenue stream, and shifts the balance for EFI sales to about 55% OEM and 45% direct or channel sales, new dynamics for EFI.