IKON/RICOH/CANON - Could there be a THIRD Shoe to Drop?

From Rueters -

"...Canon machines represent 60 percent of the products Ikon handles at the moment, with Ricoh machines accounting for 30 percent. But Ricoh said it aims to replace Canon products with its own printers and copiers in three to four years.

Analysts said the move could be a major blow for Canon in the world's largest office equipment market.

"Canon is now at risk of losing half of its copier sales in North America," UBS analyst Yoshitsugu Yamamoto wrote in a note to clients..."

Financial Times -

"...Canon has been hard-hit by consolidation within the US market for office equipment distribution, as competitors including Konica Minolta and Xerox have acquired key distributors and shaved down the network within which it can sell its products.

Shares of Ikon traded more than 9 per cent higher at mid-day on Wednesday at $16.99, below Ricoh’s $17.25 per share bid. The companies said Ricoh’s offer represeted a premium of one-third to Ikon’s average stock price over the past 60 days.

Copyright The Financial Times Limited 2008..."

Bloomberg - Aug 28

"Canon lost 5.2 percent to close at 4,790 yen on the Tokyo Stock Exchange, the biggest decline since March 3. Ricoh added 2.9 percent to 1,777 yen, after gaining as much as 6.8 percent.

UBS AG said the acquisition may cause Canon's North America revenue to fall by as much as half, while Merrill Lynch & Co. estimates the company's overall sales would drop about 3 percent if it lost Ikon as a distributor. The purchase adds 400 sales locations for Ricoh in the U.S., Canada and Western Europe, markets that account for more than half of Canon's revenue.

``It is regrettable that Canon, which has over 450 billion yen ($4.1 billion) worth of treasury stock, chose not to acquire Ikon,'' Ryohei Takahashi, an analyst at Merrill in Tokyo with a ``buy'' rating on Tokyo-based Canon and Ricoh, wrote in a report yesterday. ``Canon looks set to lose market share.''

Richard Berger, a spokesman in Tokyo for Canon, declined to comment on whether the company was in talks to buy Ikon or would submit a bid.

``We plan to accelerate our strategies that enhance our commitment to independent distributors,'' Berger said."

And the list goes on...
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As "surprising" as this little announcement was, can anyone really believe that Canon didn't know it was coming. I mean, I gotta believe that BOTH Canon and Ricoh were approached by IKON; Canon probably before Ricoh.

Canon is big and can take a hit - like the one Xerox doled out with the Global deal - but TWO thumps?

Do they really think that "accelerating...strategies...to enhance...commitment to independent distributors..." is really going to work?

You can't make this stuff up, and if Canon decides to bid against Ricoh, what fun that will be to watch this fall.

Yum yum, delicious...

Look, there's more:

MWB, Sharp, Global, Xerox - can we fit a customer into this phone booth too?

KonicaDankaIkonHP - Fallout?

Steel Partners - Dark Forces behind the IKON/Ricoh Deal

Lichtenstein Gets His Wish With Ikon Deal

Last year, Steel Partners offered IKON the opportunity to buy back all of Steele's IKON shares at a price of $17.25. At the time, IKON offered to buy the shares at $15/share, Steele declined and held on to IKON.

With yesterday's announced deal (Ricoh to Buy IKON - Shot Heard Around the World), Ricoh will purchase IKON for $17.25 per stock.

From the New York Times, Thursday August 28, 2008 -

"...The Philadelphia Inquirer noted that the activist investor’s hedge fund Steel Partners, which counts Ikon as one of its largest holdings, has been pressuring the company to boost shareholder value for some time now. Last year, Steel Partners urged Ikon to buy back share at a price of $17.25. The company declined, but offered $15 per share instead.

Steel Partners, however, decided to hang onto its holding and is now seeing its shares going for $17.25, under the terms of the deal with Japan’s Ricoh, which competes with Xerox, Canon and Konica Minolta Holdings in printers and copiers. The buyout price is a premium of 11 percent over Tuesday’s close of $15.56..."

Of course, IKON spokes-holes continue to say that the deal was a result of the company’s “strategic planning process” and industry consolidation, and “had nothing to do with” the activist investor’s involvement.

One industry observer notes,

“This is all driven by Steel Partners. They’re one of the most aggressive hedge funds in the world,”

- Damien J. Park, owner of Philadelphia shareholder- management consultant Hedge Fund Solutions, told The Inquirer. Steel Partners owns about one-eighth of Ikon, and paid about $10.50 a share, for a $6.75-a-share profit.
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Interesting backdrop -

November 21, 2007:
"...Ikon agreed in October to provide Steel Partners with confidential information in exchange for the New York fund's agreeing to not try to take over Ikon or its board of directors for six months. Steel said in November that it supported Ikon's $500 million buyback plan, which included a $295 million modified Dutch auction tender offer that Ikon completed in December..."
In exchange for the "confidential information" Steel Partners agreed ""to refrain from taking certain actions with respect to its investment in Ikon through May 2009, subject to completion of the pending repurchase plan."
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Well, the "pending repurchase plan" was never completed.

March, 2008 -

"Ikon Office Solutions Inc. said Monday it no longer intends to repurchase $500 million of its stock in its 2008 fiscal year, which ends Sept. 30, and expects to end the year having bought back $340 million in shares. "We remain committed to completing our $500 million share repurchase program," Ikon Chairman, President and CEO Matthew J. Espe said. "However, in light of the challenging credit markets and the anticipated one-time cash and pre-tax charge ... we believe refinancing our existing debt would be significantly dilutive to our fiscal year 2008 results at this time."
The provider of copiers, related office equipment and document management services said the decision means its agreement with shareholder Steel Partners II LP probably will expire at the end of the month..."
...very interesting...

I posted this, last month:

Excerpts From Espe

Fallout - Ricoh Rises, Canon Falls

Ricoh Shares Advance on Purchase of Ikon; Canon Falls

Aug. 28 (Bloomberg) -- Ricoh Co., Japan's second-largest office-equipment maker, rose the most in more than five months in Tokyo trading on speculation acquiring Ikon Office Solutions Inc. will help the company take U.S. market share from Canon Inc.

Ricoh added 6.4 percent to 1,838 yen at 9:43 a.m. on the Tokyo Stock Exchange, the biggest gain since March 19. Canon lost 4.2 percent to 4,840 yen, losing the most since July 25.

"Ikon, Unisource have similar growth plans" - 1997

Has it really been 11 years?

I ran across this article today, "Ikon, Unisource have similar growth plans" from the Philadelphia Business Journal - by Bob Brooke

"When Alco Standard Corp. of Valley Forge split in two to form Ikon Office Solutions Inc. and Unisource Worldwide Inc. on New Year's Eve, the move culminated a long-planned move to give its two main business units much needed freedom.

And in some respects, the spinoff can be seen as simply a civilized business transaction between two gentlemen -- Ikon Chief Executive Officer John Stuart and Ray Mundt, Unisource's CEO.

For years, the giant company, built on office copiers and paper, had been replicating itself through hundreds of acquisitions across the country. Alco began to take shape in the 1960s when Tinkham Veale, a wealthy Cleveland investor, assembled dozens of firms that included companies in fertilizer, machinery, electronics, coal and ice cream. In 1984, Alco sold off its manufacturing companies and focused on distribution, including its paper business, Paper Corporation of America. "

Stuart, having worked for Ricoh Corp., IBM and Royal Business Machines, joined the company in 1985 to restructure its office-products division...
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The article is a trip. A trip down memory lane. This one line stumbled me up,

Levi & Korsinsky, LLP Investigates IKON Office Solutions

WOW. That was fast.Like we need to give lawyers more work -

NEW YORK, Aug 27, 2008 (GlobeNewswire via COMTEX) -- "Levi & Korsinsky announces an investigation on the proposed acquisition of IKON Office Solutions...Levi & Korsinsky has expertise in prosecuting investor securities litigation and extensive experience in actions involving financial fraud and represents investors throughout the nation, concentrating its practice in securities and shareholder litigation. "

LOL!

Sometimes, you don't need to hear a siren to know that somebody will be chasing ambulances.

Steel Group Rumored to Have "Forced" IKON Sale

From an article at Philly.com:

"...This is all driven by Steel Partners. They're one of the most aggressive hedge funds in the world, with $9 billion in assets under management," said Park. "They've been really public, and this is no real surprise," he added. "They're the largest shareholder. They own about 10 percent at a cost of about $10.51." Steel pushed Ikon last year to buy back shares at $17.50; Ikon balked, paying up to $15 in a limited buyback that boosted the company's debt."

And off of the author's blog -

"As of June 30, 2008, Steel owned 12,456,300 shares at an average cost of $10.51/share.

Assuming the deal goes through, Steel will realize a hefty $84M gain on their four year investment.

Steel began pressuring IKN in June 2007 to do a $850M share buyback at $17.50/share. After Steel announced their intention to obtain board representation, IKN announced (in November 2007) a $500M buyback - which included a $295M dutch auction between $13 and $15/share and the balance to be purchased on the open market over the next year or so. As a result, Steel signed a standstill agreement and agreed not to seek board representation through 2009..."

My previous post on Steele:

IKON and Steel Partners - How IKON Will Be Sold

IKON, Ricoh - with the possibility of ANOTHER BIDDER?

there is an "undertone" out there - is there another bidder willing to go after IKON?

From Dividends.com, "...This acquisition continues a trend we have been seeing, in which office equipment makers have been acquiring distributors to strengthen their sales channels and product offerings. Ikon has 400 sales and services mainly in Europe and the U.S. Ricoh had recently acquired the European operations of copier service and supply company Danka Business Systems.

This is a solid offer in place, but we have added the shares of Ikon Office Solutions to our recommended list, as the possibility of another bidder jumping into the fray is a possibility. The company has a dividend yield of 1.03%, based on Tuesday's closing stock price of $15.56..."

In addition to this being the biggest move in the industry - ever - it could get even more delicious.