Kodak’s to buy Scitex printing unit

NEW YORK: Photo company Eastman Kodak Co. said that it would buy Scitex Corp.'s digital printing unit for $250 million in cash as part of a bid to shift away from its sagging film business.

Kodak, which has announced a $3 billion plan to expand into digital markets, said the deal is likely to add about $190 million in revenue in its first full year, and that about 45 percent of that revenue would be recurrent.

The camera and film company has promised to expand through acquisitions.

Shares of Scitex gained 4 percent in afternoon trading on the Nasdaq, while Kodak's stock was down 1 percent on the New York Stock Exchange.

The Rochester, New York-based Kodak also said it expects the deal, which is expected to close in the first quarter of 2004, to decrease earnings slightly in the first year and then to add to earnings afterward.

The president and chief executive officer of Scitex Corp. and Scitex Digital Printing, Nachum Shamir, is expected to join Kodak, along with other key managers, the companies announced.

Scitex Corp., of Tel Aviv, Israel, said it plans to make a significant cash distribution to shareholders following the closing of the deal. Scitex also said the transaction is expected to result in a capital gain in the range of $50 million to $70 million.

Kodak said the net cash price of the acquisition would be $240 million, after taking into account $10 million it expects to acquire at closing.

In 1993, Kodak sold its high-speed ink-jet business -- called Dayton Operations -- to Scitex, for $70 million. However, executives from Kodak and Scitex said on Tuesday that ink-jet business has changed significantly in those 10 years.

The deal is part of Kodak's plan to rely less on the traditional film business, which has suffered from shrinking demand caused in part by the fast acceptance of digital cameras.

Instead, it will invest in commercial printing and health imaging, which have been growing more quickly, as well as digital photography.

"(This deal) supports the strategy we detailed a few months ago and is a positive step along the path to a new and profitable set of opportunities for Kodak," the company's chief executive, Dan Carp, said on a conference call.

That strategy has drawn criticism from some investors, such as Providence Capital founder Herbert Denton, who has called the new course risky and asked for a better look at alternatives.

Billionaire fund manager Carl Icahn, meanwhile, recently received approval from regulators to buy up to $500 million in Kodak shares but he has not commented on his intentions.

Kodak earlier this month announced the purchase of Israeli company Algotec Systems for $42.5 million to improve its position in the market for managing and storing medical images and information.

Israel's IDB Holding Corp., a key shareholder in Scitex, said it would post capital gains from Scitex's sale to Kodak.

Shares of Kodak closed down 26 cents at $24.26, while Scitex was up 20 cents at $5.15.

(Additional reporting by James Paton)

Reuters