Fuji Xerox to buy CSG for $141M

Fuji Xerox Asia Pacific has entered into a Scheme of Implementation Deed to acquire publicly listed print and business technology solutions provider CSG for A$140.8 million.

Fuji Xerox is putting forward a cash price of A$0.31 per CSG share (449.26 million shares), valuing CSG issued equity at A$140.8 million with an enterprise value of A$181.6 million. 

The deal will see the CSG brand become a wholly owned subsidiary of Fuji Xerox Asia Pacific. 

CSG will stand to benefit from Fuji Xerox’s global print management services and solutions, expertise and operational synergies, and in turn, Fuji Xerox will increase its value proposition within the highly competitive print management sector and diversify its technology as-a-service offerings to full service solutions in Australasia, the two companies said in a statement. 

“CSG is a strategic fit for Fuji Xerox’s global business with our expertise in IT managed services and office solutions for the SME [small- to medium-sized enterprise] sector in Australia and New Zealand complementing Fuji Xerox’s leading print and technology operations,” CSG chairman, Bernie Campbell, said. 

“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 A/NZ will benefit from our long-term integration with Fuji Xerox through increased scale, broader product and service capability.

“The scheme provides certainty for our shareholders to realise the value at a significant premium. It will also provide growth opportunities for our 670 employees within a global and culturally aligned business.”

In a statement, Fuji Xerox said the combination of CSG with its Asia-Pacific business allows Fuji Xerox to strengthen its leading presence providing IT print device and managed print solutions, and to grow its technology product and service offerings for SMEs in A/NZ. 

“The acquisition reflects the company’s desire to deliver growth and expand its customer base into Australia’s small to medium business (SMB) sector,” Fuji Xerox Australia managing director, Takayuki Togo, said.

“This delivers on our strategy to broaden the Fuji Xerox offer to a diverse range of organisations across various businesses with the addition of relevant software, solutions and services that customers are now demanding from print and document providers. It is important our customers are in a position to rely on us to address their biggest business challenges, keep them competitive and enable them to focus on their core business.”

The acquisition will be subject to shareholder and court approval slated for February next year. So far, CSG’s largest shareholder, Caledonia Investments, which holds 29.1 per cent interest, is voting in favour of the scheme.

CSG closed the 2019 financial year with loss after tax of $1.8 million, considerably less than the previous year when the company posted $150 million loss.

Revenue was down three per cent to A$217 million as a result of lower than expected print equipment sales in New Zealand (NZ) which was offset by increased print equipment and display equipment sales in Australia.

CSG also faced a decline in print service revenue of 6.3 per cent and decline in finance revenue. It continued to invest in the technology as a subscription strategy in Australia and New Zealand with total technology revenue up A$2.6 million to A$46.6 million.

Technology subscription revenue grew by 17 per cent, with seats growing by approximately 18 per cent in FY19 to 24,180.

At the time, acting CSG CEO and managing director, Mark Bayliss admitted there was more work to be done with "a number" of strategic priorities for FY20 including improving customer experience, accelerating technology growth and share of earnings, improving cash conversion and working capital efficiencies, and delivering sustainable growth in earnings.

"We have grown CSG to be a stronger company over FY19 and have put in place the foundations for sustainable future. We are confident that we have the right strategy in place and, if we execute, we will achieve double digit percentage EBITDA growth in FY20," Bayliss added.

The CSG 2021 program announced earlier has resulted in a restructure that saw the business focus on SME market among other things.

"These initiatives are driving improvements in CSG’s financial performance," Bayliss said. "Quality of revenue is improving with a focus on generating profitable revenue, underlying earnings grew substantially, the balance sheet has been strengthened following the capital raising that was completed earlier in the year, and cash generation was significantly improved.

"There is still a lot of work to do to achieve our CSG 2021 Program goals, but we enter FY20 as a substantially stronger company, positioned well for further growth, and excited by the growth opportunities we see for this business."