Fuji Xerox looks to acquire CSG in an all-cash $140m deal

Fuji Xerox to acquire CSG ASX CSV recommended
Fuji Xerox’s bid for CSG values the company at $0.31 per share – a 32% premium to yesterday’s closing price.

ASX-listed IT solutions provider CSG (ASX: CSV) is set to be acquired by multinational giant Fuji Xerox in a deal worth around $140.8 million and described as “the ideal strategic fit” by CSG’s chairman Bernie Campbell.

The company was established in Darwin in 1988 as a specialised print solutions provider but has since expanded by winning several large government contracts, edging into the Queensland market and continuing its sequential growth across the country over the past 30 years.

Today, the company is a leading provider of print, display, cloud communications, desktop, storage and data solutions – all delivered as a subscription with full national support.

Under the proposed terms of the deal, the transaction will be done via Fuji’s wholly-owned entity Fuji Xerox Asia Pacific and is to be funded from Fuji Xerox Asia Pacific’s existing cash on its balance sheet.

Fuji Xerox is a joint venture partnership between the Japanese photographic firm Fujifilm Holdings and US document management company Xerox to develop, produce and sell xerographic and document-related products in Asia.

First founded in 1962, the company has become a multi-billion-dollar enterprise that employs over 40,000 people and generates close to US$11 billion in revenue each year.

Under a proposed scheme implementation deed, CSG shareholders would receive a cash consideration of $0.31 per share although the deal remains subject to shareholder and court approval in accordance with the Australian Corporations Act.

The key approvals being sought are from the Australian Competition and Consumer Commission (ACCC) and the New Zealand Commerce Commission.

In a joint statement, Fuji Xerox and CSG said that the acquisition will allow Fuji to expand its business operations in relation to small and medium-sized enterprises (SMEs) in Australia and New Zealand, “by harnessing the synergies between the two businesses in relation to the supply of office printing equipment and IT services”.

Fuji Xerox is currently one of the largest integrated document and print management providers in the Asia Pacific region, and a market leader in Australia and New Zealand.

By absorbing CSG, Fuji Xerox intends to extend its market position in Australia and New Zealand and thereby strengthen its existing IT print device and managed print solutions business, as well as, growing its technology product and service offerings to local companies.

“The combination of Fuji Xerox and CSG represents an exciting opportunity for our stakeholders, employees and business partners, as well as enhancing the products and services available to help customers navigate their evolving technology needs,” said Kouichi Tamai, president and representative director of Fuji Xerox.

Done deal

Earlier today, the CSG board publicly recommended that CSG shareholders vote in favour of the proposed deal, saying that it is “in their best interests” and that all existing directors intend to do likewise.

CSG’s largest shareholder, Caledonia Private Investments, currently owns 29.1% of the company and has already confirmed that it will vote in favour of the proposed acquisition based on the disclosed terms.

The terms of the deal mean that CSG shareholders stand to receive a significant 32% premium to the company’s closing price of $0.235 yesterday and a 55% premium to CSG’s share price of $0.20 after the FY 2019 full year results were announced.

“The scheme represents an outstanding outcome for all CSG stakeholders, shareholders, employees, around 10,000 customers and other business partners,” said Mark Bayliss, acting chief executive officer and managing director of CSG.

“The opportunity to realise certain value at a significant premium represents a great outcome for our shareholders, who have been supportive over the company’s recent period of strategic transformation,” he added.

According to the proposal, CSG shareholders will have the opportunity to vote on the scheme at a court convened shareholder meeting, expected to be held in early February 2020.

Assuming Fuji Xerox’s takeover is approved by all the relevant parties and regulators, the deal will be executed within the same month.

“The all-cash offer is attractive for shareholders and reflects the positive impact of the transformation achieved to date as part of our 2021 strategy. Our more than 10,000 SME customers across Australia and New Zealand will benefit from our long-term integration with Fuji Xerox through increased scale, broader product and service capability,” said Mr Campbell.

News of an impending acquisition pushed CSG shares up to $0.31, almost 32% higher.