OcA[c] N.V. `To acquire Imagistics International Inc.` Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

ROKUS VAN IPEREN, CEO, OCE N.V.: Good morning, ladies and gentlemen, and welcome to this conference call and webcast for Oce NV in the Netherlands. Here in the room are present Jan van den Belt, Pierre Vincent, and myself. We are proud to announce that Oce and Imagistics International have entered into a definitive agreement for Oce to acquire all the outstanding shares of Imagistics. During this presentation, we will give you further information about this deal; and as the lady already said, after the presentation you are invited to put forward your questions on this topic.

Please go to slide 3. This is the agenda of the presentation. We start with a summary of the deal. Then we will explain to you the strategic context of this acquisition. We will introduce a little bit further than in the press release Imagistics International, talk with you about the strategic fit, some first ideas about the integration. Then will Jan van den Belt take over the word and explain to you all about the financials and the conclusions.

Go to slide 4, summary of the deal. The combination of Oce and Imagistics creates a strong and profitable full-line supplier of print and document management products and services. Based on the last 12 months' results, the combined financials are, in revenue terms, EUR3.1 billion and an EBITDA of EUR310 million. After the year 2006, we expect that as well the earnings per share as the cash earnings per share will be accretive.

The deal is structured as a cash tender offer. Oce offers $42 per share on all outstanding shares, meaning a transaction value of around US$750 million or EUR618 million. The conditions for closing are, of course, in the first place that we acquire more than 50% of the ordinary shares; and of course we also need antitrust clearance. We expect that the closing can take place in October 2005.

Please go to slide 5. Let's now put the acquisition of Imagistics into the perspective of Oce's strategic objectives and strategic actions. Most of you know that since 2002 these are the strategic objectives of Oce. We strive for a top three position in selected market segments, technical documentation, display graphics, and productive printing in corporate and commercial accounts. In addition to that, a leading position in document-related businesses; and the financial objectives you know as well as we do.

In order to realize these objectives we strive for an average revenue growth rate of 10%, of which 5% autonomously and 5% by acquisitions measured over a longer period of time. This acquisition will certainly contribute to the realization of these targets.

Please go to slide 6. Imagistics is active in the corporate printing market, a segment that is served within Oce by our strategic business unit, Digital Document Systems. This slide shows the strategic action plan of DDS. The three main topics in our strategic action plan are investments in distribution, investments in a competitive product portfolio, and improvement of operational excellence. Top priority for DDS is to grow our top line. We have to create more business; that means placing more machines in the market and in that way increase our service revenues.

That means that we have to increase our distribution power, our total number of sales reps in the market. Imagistics will help us tremendously to increase our distribution power. They also deliver us a great access to national account customers, and also they help us to create a strong OEM portfolio to add to the Oce assortment.

Please go slide 7. This graph shows the size of the printing market in Europe and the United States. In Europe, Oce has a market share of 7.5%, which is even higher as you know in some segments. The addition of Imagistics here is limited, with 0.5%. In the much bigger U.S. market, Oce has a market share of only 3%. As a global player, developing and producing products for the global market, we have to increase our presence and distribution strength in U.S. markets. You could put it as critical mass. The acquisition of Imagistics will grow our market share in the U.S. to 5%.

We go to slide 8. Let's now introduce Imagistics a bit further to you. Imagistics is a direct sales and service provider of what they call document imaging solutions for the U.S., Canadian, and UK markets. The company is a spin-off from Pitney Bowes in December 2001, into a public company trading on the New York Stock Exchange. The pre-transaction announcement market cap of the company is $510 million or $33 per share.

Imagistics has been able to show a consistent financial performance, resulting in 2004 in US$609 million in revenues and 7% or $43 million EBIT. This consistent financial performance has been well appreciated by the financial community. The stock of Imagistics has outperformed its peer group since the spin-off in 2001.

Please go to slide 9. This slide shows the financial performance of Imagistics since 2002. In 2002, the fax business was still an important part of their revenues. This business declined since then with 20% to 30% per year, and that decline is also expected to continue in the years to come. On the other hand, the revenues in printers and copiers has grown over the years and has compensated for the decline in fax business. EBIT margin has consistently been around 7% during the last three years. You know that this margin is at the high end of the peer group and certainly better than most of the peers. Also in the first half of 2005, they managed to keep the EBIT margin on this level.

Slide 10, please. We envision Imagistics as a high-quality organization built over the last 35 years in a solid corporate environment with good corporate government and working methods. Imagistics delivers to us a nationwide direct sales and service organization in the United States with, in total, 3,400 employees, of which 1,200 are active in sales, 1,200 active in service, and smaller operations in Canada and the UK, around 100 employees per country.

The offerings of Imagistics to their customers are multifunctional products, printers, and copiers in the segments 1 to 5 and, as already said, fax machines, which are declining rapidly, with around 25% per year. Their primary suppliers are Konica Minolta, Toshiba and Sharp. Konica Minolta is also the partner of Oce in providing low and mid-range monochrome and color printers at this point in time, mainly for the European market; but in the combination it will also happen for the American market. As you know, Oce's portfolio starts in segment 4, but is mainly in 5 and 6. So you could say that the assortments of Imagistics and Oce are very complementary.

Please go to slide 11. Apart from 1,200 sales reps, Imagistics creates a great access to an important customer base, namely, major national accounts and large governmental organizations. They have around 4,000 customers in this category, even a higher number of customers in the mid-size and regional business, including the educational organizations, and they have a number of business product centers for serving the local businesses.

Imagistics and before that Pitney Bowes has created many long-standing customer relationships, which is fully in line with the go-to-market approach of Oce, during the last 35 years, of which many are Fortune 1000 companies. As a matter of fact, in those 35 years, Oce and Pitney Bowes at that time had a successful relationship. They sold very successfully the first mid-volume analog copiers of Oce in the U.S. market. You can clearly see that Imagistics competes successfully with other major office equipment …