HP Inc (NYSE:HPQ) announced a definitive agreement to acquire Samsung Electronics printer business in a deal valued at $1.05 billion.
The acquisition positions HP to disrupt and reinvent the $55 billion copier industry, a segment that hasn’t innovated in decades. Copiers are outdated, complicated machines with dozens of replaceable parts requiring inefficient service and maintenance agreements. Customers are frequently frustrated with the number of visits needed to keep copier machines functioning. Today, HP is investing to disrupt this category by replacing copiers with superior multifunction printer (MFP) technology.
Samsung has built a formidable portfolio of A3 MFPs that deliver the performance of copiers with the power, simplicity, reliability and ease-of-use of printers and with as few as seven replaceable parts. Integrating the Samsung printer business’ products, including their mobile-first and cloud-first user experience, with HP’s next-generation PageWide technologies will create a breakthrough portfolio of printing solutions with the industry’s best device, document, and data security.
This is the largest print acquisition in HP’s history and accelerates its growth opportunities in the copier segment, strengthens its leading laser printing portfolio that has been established with Canon, and paves the way for future printing innovation. It also creates new avenues for growth and greater profitability for partners as they expand managed print services as sales models shift from transactional to contractual.
“When we became a separate company just 10 months ago, it enabled us to become nimble and focus on accelerating growth and reinventing industries,” said Dion Weisler, president and CEO of HP. “We are doing this with 3D printing and the disruption of the $12 trillion traditional manufacturing industry, and now we are going after the $55 billion copier space. The acquisition of Samsung’s printer business allows us to deliver print innovation and create entirely new business opportunities with far better efficiency, security, and economics for customers.”
Samsung’s printer business also brings a compelling intellectual property portfolio of more than 6,500 printing patents and a world-class workforce that includes nearly 1,300 researchers and engineers with advanced expertise in laser printer technology, imaging electronics, and printer supplies and accessories to support continued innovation in print market solutions.
“HP Inc. has been a valued partner and customer of Samsung,” said Dr. Oh-Hyun Kwon, vice chairman and CEO of Samsung Electronics Co., Ltd. “We can now leverage our combined capacity for innovation to further enhance the value of our relationship.”
Acquiring Samsung’s printer business will also strengthen HP’s ability to service customers in global laser printing, a category where it has enjoyed a strong, mutually beneficial partnership with Canon for more than three decades. HP is confident this transaction will provide new opportunities to further strengthen and accelerate this highly valued relationship.
“HP and Canon have long discussed print innovation to create customer value in business printing and in the growing MPS market,” said Fujio Mitarai, chairman and CEO of Canon Inc. “This transaction will further evolve our collaboration and bring about growth for both of our companies.”
The acquisition is expected to be accretive in the first full year following closing, with cost synergies and a strong financial model. The transaction is expected to close within 12 months pending regulatory review and other customary closing conditions. After closing, Samsung has agreed to make a $100 million to $300 million equity investment in HP through open market purchases. (Original Source)
Shares of HP closed last Friday at $14.07, down $0.56 or -3.83%. HPQ has a 1-year high of $14.82 and a 1-year low of $8.91. The stock’s 50-day moving average is $14.33 and its 200-day moving average is $12.80.
On the ratings front, HPQ as been the subject of a number of recent research reports. In a report issued on September 8, Brean Capital analyst Ananda Baruah reiterated a Buy rating on HPQ, with a price target of $18, which implies an upside of 28% from current levels. Separately, on September 6, Jefferies’s James Kisner reiterated a Buy rating on the stock and has a price target of $16.75.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Ananda Baruah and James Kisner have a total average return of 2.4% and 4.1% respectively. Baruah has a success rate of 55% and is ranked #799 out of 4124 analysts, while Kisner has a success rate of 56% and is ranked #735.
Overall, 8 research analysts have assigned a Hold rating and 6 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $15.31 which is 8.8% above where the stock closed last Friday.
HP Inc. provides products, technologies, software, solutions and services to individual consumers, small and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. It operates through following business segments: Personal Systems, Printing, and Corporate Investments. The Personal Systems segment provides commercial personal computers, consumer PCs, workstations, calculators and other related accessories, software and services for the commercial and consumer markets. The Printing segment provides consumer and commercial printer hardware, supplies, media and scanning devices. Printing is also focused on imaging solutions in the commercial markets. The Corporate Investments segment includes HP Labs, the webOS business and certain business incubation projects.