Scitex Vision and Nur on speaking terms again
Avishai Ovadya
06.09.2001 18:47
Nur Macroprinters (Nasdaq: NURM) and Scitex Vision are again discussing a merger, but keeping mum about it. Nur Macroprinters CEO (and ExScite)Erez Shahar said that “the company does not react to rumors,” and Meir Shani, CEO of Clal, which controls Scitex, said, “We’re not commenting on any negotiations, and our position hasn’t changed.” However, the two are conducting negotiations, which are apparently in their early stage.“Generally speaking, the merger is a good idea,” Yair Spalter of Kardan Capital Investments says. “The two companies are fighting each other in the marketplace. The merger will put an end to that. At the same time, it would have been better if the merger had taken place two years ago.

”Scitex Vision used to benefit from the marketing channels of the preprint division that merged with Creo Products (Nasdaq: CREO). Following the merger, they developed their own marketing and distribution system, and invested hefty sums. In my view, a merger was a much more attractive option at that point – far more than it is today. In any case, the two companies have already discussed a merger in the past, but it didn’t materialize in the end.”

What’s Scitex worth?

The failure of the merger talks is attributed to disagreement over the price. The price of Wall Street-traded Nur Macroprinters is clear, but Scitex Vision’s price is open to argument. Scitex Vision said on more than one occasion that, although Nur’s sales are bigger, Scitex Vision’s value was higher, due to its technological edge and its fast revenue growth. Scitex Vision backed up its argument with a $150-190 million valuation for an issue in Europe about a year ago. However, the issue didn’t go through, due to the market situation, and Scitex Vision went back to reality.

”Nur’s share fell due because its business somewhat declined, and its price currently reflects a company value of about $80 million. With Nur traded at such a value, while Scitex Vision is lagging a year behind in terms of revenue and market penetration, it’s clear that Scitex Vision is worth less,” Spalter says. “In addition, Nur offers a wider range of products, thanks to the acquisition of Salsa, whose cheaper products are in fact competing with Scitex Vision’s products, Nur’s second quarter sales were over $30 million, whereas Scitex Vision’s sales were $24 million. In any case, I assess Scitex Vision’s value for the merger at $50-60 million.”

This may not be enough for Scitex Vision shareholders, “but in the long run,” Spalter adds, “It may be very worthwhile. There’s a very high degree of synergy between the two companies, and the whole is greater than the sum of its parts. Teaming up will cut administrative, general, sales and marketing expenses, and significantly improve operating efficiency. In addition, the price erosion in the sector due to Scitex Vision’s aggressive penetration will halt. The merged company will have tremendous power. There’s another competitor, Viotech, but the merged company will dominate the market. In my view, if the shareholders consider the long term, and realize that they’re diluting now, but holding a company whose chances of success are higher, they’ll agree to the process.”

$30 billion market

Wide-format printing has been affected by the slowdown. Nur issued two profit warnings in the past, saying it would not meet its targets, although it managed to break even in the second quarter. The company even expressed cautious optimism about an improvement in future quarterly results, in view of its restructuring plan, which involved laying off 14% of the staff and merging various offices.

At the same time, the company’s management announced it was launching a customer-financing program with City Capital. The program could encourage small and medium-sized printing firms suffering from a credit crunch due to the tightening of credit lines on the US market, to buy new machines. “Two-thirds of the quarter have already passed, and it’s still too early to tell what the quarter will look like, because things aren’t clear at this stage,” Erez said today. “All in all, we’re still cautiously optimistic about the second half of the year. There are positive signs, but things aren’t clear enough yet. In any case, we’ve completed our restructuring plan, and now we’re a better and more efficient organization. We don’t expect further layoffs.

”We’re still optimistic about the long term. We see a consistent move from conventional printing to digital printing, and the market is worth $30 billion. We and our competitors represent an alternative to conventional printing. Our solution, which is cheaper, will eventually be adopted by the customers. The only question is how long it’s going to take.”

Published by Israel’s Business Arena on 6 September, 2001