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Punch to Sell Xeikon to Bencis Capital Group for €110m (Commentary by David Zwang)

Friday, July 19, 2013

Press release from the issuing company

In accordance with the provisions of the Belgian Act of 2 August 2002 and the Dutch Financial Supervision Act, Punch International nv ('Punch'), on the one hand, and Bencis Capital Partners Belgium NV ('Bencis'), on the other hand, announce that they have entered into an agreement for the respective sale and purchase of the controlling interest that Punch holds in Xeikon N.V. ('Xeikon').

Structure and valuation

The purchase and sale transaction relates to all 18,856,298 Xeikon shares, i.e. 65.68% of the subscribed share capital held by Punch.

According to the agreement, Bencis will pay a price of EUR 5.85 for each Xeikon share. This means a premium of 69% versus Xeikon's closing price on 7 January 2013 and a 32% premium in relation to the average closing price of the Xeikon share in the last six months. The purchase price offered for the 18,856,298 shares held by Punch is EUR 110,309,343.30. No dividends or other distributions will be made prior to the transaction.

The Gimv-XL fund (being Gimv nv and Gimv-XL Partners Comm.VA) will invest alongside Bencis and acquire an indirect minority stake of approximately 20% upon final closing of the transaction, through an investment vehicle held with Bencis.


The agreement is subject to a number of conditions precedent that must be fulfilled by no later than 17 September 2013.

Among other things, the transaction is subject to the effective provision to and reception by Bencis of the necessary financing and that Xeikon's half year figures as at 30 June 2013 are in line with the average of the previous two years. With regard to the financing, Bencis is already at an advanced stage.

As part of the agreement, Punch will acquire customer receivables from Xeikon for a maximum amount of EUR 6,000,000. These receivables relate to machines supplied by Xeikon that customers have not yet paid for in full, i.e. under click-and-charge contracts, contracts with instalment payments or financial leases. As the receivables are repaid, Xeikon can transfer up to EUR 1,500,000 of extra receivables per year on condition that total outstanding balance does not exceed EUR 6,000,000. This facility reinforces Xeikon's working capital and would be made available until 2019.

A further condition is that the remaining ties between Xeikon and Punch must be carved out prior to the transfer of the controlling interest. For this reason, Punch is acquiring all of Xeikon's interests in Accentis at a price of EUR 9,600,000, namely 554,484,942 Accentis shares (i.e. 43.74% of the issued capital) at a price of EUR 0.01 per share and various claims against Accentis. Moreover, Xeikon is taking over Point-IT at a price of EUR 800,000. Point-IT provides IT services to Xeikon. Under applicable rules, Punch is not under any obligation to launch a public offer on the remaining shares in Accentis.

The property on the Oostkaai in Ieper (Belgium), where the offices and production facilities of the Xeikon division Prepress Solutions are based, will be transferred, as planned, by Accentis to Xeikon for a gross price of EUR 9,200,000.

Lastly, the transaction is subject to the approval by the competent competition authorities in Germany.

Mandatory public bid - purchase of own shares - end of stock exchange listing

It is planned to complete the transaction by 17 September 2013.

In the transaction structure envisaged by Bencis, within two weeks from the expected completion of the transaction, and prior to the mandatory public bid, Xeikon will purchase a substantial part of its own shares. It expects to complete these purchases at the same price as the price agreed with Punch.

If the transaction materialises, and if and when the shares are being transferred, in accordance with Dutch legislation a public bid for the freely traded Xeikon shares will be made, at a price of EUR 5.85 per share. Moreover, after the end of the application period, it is the goal to launch a squeeze out on the remaining Xeikon shares, if possible.

Punch's position

Punch's board of directors has carefully evaluated the various aspects of the intended transaction and believes it is in the best interest of Punch's shareholders. The board of directors will still consider how the proceeds of the transaction can best accrue to Punch's shareholders.

Continuity - position of Bencis and Gimv-XL

Bencis and Gimv-XL aim at reinforcing Xeikon's competitive position by supporting Xeikon's strategy and growth plan on an independent basis, with the goal to create to create long-term value.

The transaction should not have a negative effect on the continuity and employment of the company.

Commentary by David Zwang

This acquisition, which is really more like a management buy-out with private equity funding, should be of significant benefit to Xeikon as they continue their growth path. In 1993, Xeikon was one of the first companies to deliver a production continuous feed toner device to the market; however, the competition came on hard and fast, and it was only a few years ago that some in the industry had written off Xeikon as a niche player. 

Under new leadership, Xeikon has become a leader in digital toner based label production and has been able to refocus its products with its 8000 series and a market direction to increasingly address direct mail and marketing applications as well. Its acquisition of basysPrint and ThermoFlexX for CtP systems also broadened its offerings beyond digital print in targeted markets. Add to that the newest Trillium liquid toner technology products, and you have the makings of a significant competitor in digital printing solutions.

Punch International, which acquired Xeikon in 2007, has been good for Xeikon, and gave the company the room and resources to stabilize and refocus. Xeikon has shown that it can weather the general and industry-wide economic conditions with a 29% net increase in profits on same year-to-year sales from 2011 to 2012. However, Xeikon now needs to use its forward momentum to expand development, marketing and sales. Bencis Capital Partners is prepared to give Xeikon the room and resources it needs to make this expansion a reality. Bencis is not new to the printing industry, as they currently also hold Stork Prints in their portfolio. In a sense, these two companies offer a level of competition as well as synergy. It will be interesting to see if and how this new family relationship will play out. The market seems to think this is a good move as well, with Xeikon stock (XEI:AS) up over 4% as of this writing.


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