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.