Commentary & Analysis
EFI Walks the Digital Fashion Runway - July 2015 M&A Activity
July 2015 –Mergers, Acquisitions & Restructuring in the Printing, Packaging & Related Industries.
By Mark R. Hahn
Published: August 10, 2015
Digital printing of textiles takes center stage as EFI stakes out a leadership position with its acquisition of Reggiani Macchine, the highly specialized Italian manufacturer of textile printing equipment. In addition to the acquired company’s more traditional rotary and flatbed screen printing devices, Reggiani produces a line of industrial digital inkjet machines that are bring the digital revolution to the world of fashion and fabrics. With EFI’s expertise in front-end image processing and color management technology; can it be too long before consumers can order completely customized digitally printed wardrobes? WhatTheyThink's Richard Romano interviewed EFI CEO Guy Gecht on these acquisitions and how they fit into EFI’s overall portfolio, and what they will mean for EFI’s current—and potential—customers.
As EFI moved into digital textile printing equipment, others were busy in July consolidating the business of researching and supplying specialty inks designed for printing on textiles. Italy-based JK Group acquired Sawgrass Industrial, a US-based innovator of digital sublimation inks. Primary applications for the company’s products include fashion apparel, fabrics for furnishing and décor products, promotional decoration of garments, soft signage and just about any else you can think of that is made from printed textiles. Sawgrass Technologies, which had been previously split from the now divested industrial products division, will continue to operate as an independent company focused on non-industrial digital printing for the less than 42” wide format market.
These transactions follow right on the heels of Epson’s acquisition last month of For.Tex, an Italian distributor of textile printing inks and manufacturer of treatment agents used in textile printing. Epson and For.Tex have worked together for several years to develop and market Epson’s Monna Lisa industrial inkjet digital textile printer, manufactured by Italian equipment manufacturer Robustelli using Epson’s inkjet technology and print heads.
Headquartered in Novedrate, Italy, the JK Group itself is the result of a combination last year of Kiian Digital and J-Teck3, each of them leaders in inks used in digital textile printing. Both companies, as well as the companies acquired by EFI and Epson, operate within the region just south of Lake Como in Italy, noted as the heart of the Italian and European textile industry and a short drive from the runways of international fashion capital Milan.
Visant Corporation, owner of several print-centric companies including yearbook publisher Jostens, exited its holding in Phoenix Color. Headquarted in Maryland, Phoenix Color specializes in book printing, including cover components. The printing company focuses on products that require full color printing throughout, such as children’s illustrated books. The company also prints folding cartons, labels and commercial printing products that may require specialized decorating techniques such as foil stamping and embossing.
The buyer of Phoenix Color is ALJ Regional Holdings, a public company traded on the OTC Pink sheets, and which has other investments in business process outsourcing and flooring products. ALJ reportedly is paying $90 million for Phoenix, or just slightly north of 1 times the acquired revenues of $88 million. Based on increased EBITDA that ALJ expects of $22.9 million, and assuming that there is not much synergy between its holdings, we can infer that the deal was valued at approximately 3.9 times EBITDA.
In addition to the acquisition of the manufacturer of digital textile printing machines, EFI simultaneously announced the acquisition of Israel-based Matan Digital Printers. The company manufactures a line of UV-ink super-wide high-speed grand format printers used to produce large indoor and outdoor graphic banners and wraps. With the wide profile, high-speed roll-fed and in-line finishing capabilities of the acquired lines, EFI is positioning the Matan line as a lower-cost volume alternative to its high-end Vutek line of digital UV flatbed printers. The acquired company also produces smaller machines used to digitally print specialty items such as traffic signs and license plates.
OKI Data Corporation, which you may remember as the manufacturer of those early (and noisy) PC-compatible dot matrix printers, acquired Seiko I Infotech, a manufacturer of wide format inkjet printers for the graphics market, as well as toner-based wide format printers for the architectural, engineering and construction market.
Private equity firm American Industrial Partners is investing once again in the printing equipment industry, this time acquiring the venerable US-based web offset press manufacturer Goss International, which has been operating under the ownership of the Shanghai Electric Corporation. Goss presses are ubiquitous in the newspaper industry and also include the Sunday line of commercial presses acquired from Heidelberg back in 2004. The fund’s portfolio currently includes Presstek, another US-based company that offers digitally imaged plates and imagers for offset presses, as well as a line of offset presses using its plate technology. An earlier investment in Mark Andy, manufacturer of flexo presses, was sold to the management team in a leveraged buyout in August 2014.
Assets in the paper industry continue to shift as overall volumes decline in the face of continuing pressure on printed products from electronic media and content distribution. Neenah Paper acquired FiberMark paper company in July, which itself had acquired Crocker Technical Papers last year. The acquisition brings the Crocker specialty paper mill into the Neenah fold alongside the Crane Technical Materials company acquired by Neenah last year. The acquisitions provide diversity outside the company’s traditional strength in printing papers, adding paper products in filtration, electrical insulation, and other industrial uses for fiber-based products.
Japan Pulp & Paper acquired the remaining 49% shares it did not already own of Gould Paper, a New York-based distributor of printing papers in the US and western Europe. The age of family-owned printing paper distributors is drawing to a close - this deal follows the two acquisitions of regional distributors earlier this year by Central National-Gottesman, another global paper distributor.
BW Paper Systems, formed last year when privately-owned Barry Wehmiller consolidated its paper processing companies in conjunction with a simultaneous acquisition of three other companies, is again in the market, this time acquiring the paper processing equipment of bankrupt German company Bielomatik Leuze. Bielomatik is probably best known in the commercial printing market for its sheeting equipment sold by Heidelberg under the CutStar brand. Upon completion of the deal, BW Paper Systems will have global revenues of $400 million, producing several brands of machinery that cut, count, wrap, corrugate, die cut, glue and otherwise process paper products.