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IKON and GE Complete Transaction for U.S. Leasing Business

Friday, April 02, 2004

Press release from the issuing company

VALLEY FORGE, Pa.--March 31, 2004-- IKON Office Solutions, Inc. today announced the completion of its previously announced transaction with GE Commercial Finance ("GE") for its U.S. leasing business. As part of the transaction, and subject to post-closing adjustments, IKON will sell certain assets and liabilities of IOS Capital LLC, IKON's captive leasing subsidiary in the U.S., including a portion of its lease portfolio and the transfer of its facilities, systems and processes to GE. In addition, IKON has entered into a Program Agreement with GE for funding and servicing of IKON's lease originations in the U.S., making GE the Company's preferred lease-financing source in the U.S. The Company also announced today that it has signed a definitive agreement with GE to sell the Company's approximate CN$220 million Canadian lease portfolio to GE. As part of this transaction, GE will also become IKON's preferred lease-financing source for its Canadian operations, with IKON to receive an origination fee of three percent on all new lease originations funded by GE. The sale is subject to required regulatory approvals and customary conditions and is expected to close in the third quarter of Fiscal 2004. "To ensure IKON continues to be the customer's single and most reliable source for integrated document management solutions, our lease financing offering will continue with GE under the name, IKON Financial Services(SM)," stated Matthew J. Espe, IKON's Chairman and Chief Executive Officer. "IKON remains committed to a strong leasing program with a high quality portfolio, industry-leading financing programs, and exceptional customer service." As previously announced, the Company intends to use the gross proceeds from these transactions to pay transaction-related deferred taxes; repay borrowings, including the Company's lease conduit facilities; strengthen its balance sheet; and, for general corporate purposes. Consistent with these plans, the Company recently announced a tender offer to repurchase up to $250 million in aggregate principal amount of its outstanding $345 million 7.25% Notes due 2008. Also in connection with the transaction, the Company has terminated its existing $300 million credit facility and is in negotiations with lenders to replace the facility on terms that provide greater financial flexibility, including the ability to repurchase shares. As a result, IKON's Board of Directors has authorized the repurchase of up to $250 million of the Company's outstanding shares of common stock, replacing the Fiscal 2000 share repurchase authorization. Share repurchase activity will be accomplished through public and/or private transactions and will be based upon market conditions and other considerations. "This alliance marks a significant achievement in our ongoing effort to improve IKON's financial flexibility, operating performance, and future growth opportunities," continued Espe. "Over time, the U.S. and Canadian transactions will substantially transform our balance sheet, while simultaneously providing us with additional capital to bring value to our shareholders and accelerate growth in our core business of document management solutions. With the recently announced debt tender offer and increased authorization for share repurchases, we have already begun to take action toward our long-term goals and will continue to move aggressively to bring additional value to our shareholders." As a result of the closing of this transaction, the Company's previously communicated 2004 earnings expectations of $.82 to $.87 per diluted share and cash from operations of $325 to $350 million for the full fiscal year will be revised. The Company plans to review the transaction and its financial implications during its second quarter conference call scheduled for April 29, 2004. In the near term, the ability to attain accretion as a result of the U.S. and Canadian transactions will largely depend on the price, timing and quantity of debt reductions and share repurchase activity. Additional details regarding the April 29 conference call and webcast will be included in a future announcement. For the second quarter ended March 31, 2004, the Company expects to record a pretax loss on the transactions of approximately $13 to $18 million, consisting primarily of accounting, legal and consulting fees and other miscellaneous expenses associated with the transaction.

 

 

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