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Commentary & Analysis

FREE: Presstek Acquires Precision Lithograining – Commentary and Analysis


By WhatTheyThink Staff
Published: June 4, 2004

Yesterday, Presstek announced the acquisition of privately-held plate manufacturer Precision Lithograining in an all cash transaction valued at approximately $13 million. This is the first acquisition by Presstek's current management team and, according to Ed Marino, Presstek's president and CEO, is intended to solidify Presstek's position as the pre-eminent supplier of chemistry-free and process-free imaging. The acquisition of Precision (PLC), which increases Presstek's revenue by about 20%, is expected to close in the third quarter and be accretive to Presstek's earnings in the first year.

This acquisition is very important to Presstek, both strategically and operationally. It strengthens Presstek's manufacturing capability; enhances Presstek's operating leverage; provides security for core Anthem technology; and enables a coordinated marketing effort for Presstek's Anthem family of plates (Anthem, Aurora, and Freedom).

Presstek and PLC have had a relationship for five years, and PLC currently manufactures the chemistry-free Anthem technology plates. Acquisition of this manufacturing capability gives Presstek a firm platform to support its future growth. According to Presstek CFO Moosa E. Moosa, PLC's digital business has nearly doubled in the last year. The introduction of a number of new chemistry-free and process-free plates at drupa indicates a broader market acceptance for this technology. Presstek clearly expects continued growth. The acquisition of the manufacturing plant also gives Presstek substantial operating leverage as the business grows, providing control of manufacturing and sourcing as well as additional capacity.

Marino, discussing the acquisition in a conference call with investors, said the acquisition of PLC will provide a solid manufacturing backbone to grow the market position for Anthem technology. They will continue to broaden the Anthem family of products. According to Marino, Presstek is not just buying the manufacturing business; the acquisition brings the know-how of manufacturing back to Presstek and provides a platform to develop and manufacture new products.

The PLC acquisition also will enable Presstek to coordinate the marketing of the Anthem technology family of chemistry-free plates, which includes Anthem, sold by Presstek; the AB Dick-branded Freedom sold with the recently-introduced Vector CTP system; and Aurora, a Precision-branded chemistry-free plate sold through the PLC dealer channel. Bringing the manufacturing and marketing of this family of products together under Presstek's control will insure a more harmonious marketing and sales strategy, with less potential for conflict.

The bulk of Precision's business consists of conventional analog plates. Although not growing as rapidly as the digital business, it is profitable, healthy, and growing (18% year over year). It brings with it an established dealer channel and customer base, as well as a number of OEM partners. This business is incremental and non-overlapping. Precision will be operated as a Presstek-subsidiary, so there will be no impact on existing channels nor dilution of Presstek's message and market position. Nevertheless, these are key partnerships upon which Presstek can build.

In summary, the acquisition appears to be an excellent move for Presstek, growing their business, adding important manufacturing capacity, technology, and knowledge. It brings the marketing and sales of Anthem product family under one roof and should provide a sound basis for Presstek's continued growth.



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