Kodak to buy Creo for $980 m in cash

Franklin Paul

NEW YORK: Eastman Kodak said it would buy printing technology firm Creo Inc. for about $980 million in cash to bolster its strategy to push more aggressively into commercial printing.

Kodak, which has been undertaking a challenging transition to digital products as it shifts focus from its flagging traditional film business, will pay $16.50 a share for Creo, whose systems manage images and convert computer files into plates used to print books, magazines, and other products.

Shares of Creo, whose board has approved the proposed deal, rose 13.7 percent to $16.33 in morning trade on Nasdaq. Kodak shares rose 0.6 percent to $32.90 on the New York Stock Exchange.

"(Kodak) will gain access to Creo's 25,000 commercial print customers, (and) Creo's software expertise should prove beneficial to Kodak," said Cross Research analyst Shannon Cross.

Cross added that the deal eliminates a growing competitive threat that Creo posed to Kodak's Kodak Polychrome Graphics, a maker of commercial graphics films and plates, Kodak Chief Executive, Dan Carp told analysts on a conference call that with this deal, Kodak has "essentially reached the conclusion" of its acquisition plan, under which it earmarked up to $3 billion between 2003, when its strategic shift was announced, and 2006.

Creo's management has been under pressure from Goodwood Inc. and Burton Capital Management, who together hold about 6 percent of Creo's shares, to cut costs and return the company to profitability, and oust Chief Executive Amos Michelson.

Richard Puccetti, chairman and chief investment officer of money manager Goodwood said the group had no comment about the deal and needs "time to go think about all of our options."

Creo on Monday postponed its shareholders meeting until March 29.

KODAK STANDS BY PROFIT FORECAST

Kodak said the deal will modestly dilute earnings for the rest of 2005, but said it was committed to a forecast of 2005 full-year earnings per share in the range of $2.60 to $2.90.

For 2006, Kodak said it expects that the acquisition of the Vancouver, British Colombia-based company to add at least 5 cents per share to operational earnings, with about $700 million of incremental revenue.

Kodak, based in Rochester, New York, reiterated its target for earnings from operations of $3 a share in 2006.

Earlier this month, it set plans to take full control of Kodak Polychrome Graphics, a maker of commercial graphics films and plates, by buying Sun Chemical Corp.'s 50 percent stake in the joint venture for about $817 million over several years.

About one-quarter of Creo's 4,000 workers worldwide are in Israel after Creo bought Israel's Scitex Corp's prepress division in 2000.

Kodak's buying binge has included several deals in Israel, including its agreement this month to buy OREX Computerized Radiography for $50.5 million, and its purchase late in 2003 of Scitex's digital printing unit for $250 million.

(Additional reporting by Susan Taylor in Ottawa and Steve Scheer in Jerusalem)