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Lexmark Increases ReadSoft Acquisition Bid to $224 Million

Zacks Equity Research

Lexmark International (LXK) again raised its bid for ReadSoft by 16% to 50 Swedish Krona (SEK.V). Lexmark has offered $224 million for ReadSoft, raising its prior bid of $194 million. It is worth noting that Lexmark’s original bid for the company was $182 million.

Previously, Lexmark increased its offer to negate counter bids from other interested parties. The current bid price is also touted to be 11% higher than any rival bid for ReadSoft in recent times. According to Reuters, Hyland Software is interested in ReadSoft as well and Lexmark’s increase in offer price is essentially to counter its bids.

Nonetheless, the ReadSoft board and its two major shareholders are reportedly in favor of the revised offer. However, further counter-bids cannot be ruled out.

Post acquisition, ReadSoft is expected to be integrated into Lexmark’s Perceptive Software segment which has been strengthened with several acquisitions such as PACSGEAR, Saperion and Brainware to name a few.   

Lexmark’s interest in ReadSoft is of strategic importance as it will strengthen its position in the European business process management market. Reportedly, Gartner has recognized EMEA to be the second biggest content and process management software market. Moreover, with more than 12,000 customers in diversified sectors and operations in 71 countries, ReadSoft provides Lexmark the perfect footing to expand its business process solutions business. Additionally, the valued clientele including John Deere, BASF and HSBC Bank is another positive.

We see good growth prospects for Lexmark in the software sector although the company is trying to expand its hardware solutions business. However, the overall macro uncertainty could affect product demand. Lexmark has a strong market position, but reduced demand for traditional printing hardware has affected pricing in the computer peripherals market.

Though constant pricing pressure from competitors such as Canon Inc., Xerox Corp. (XRX) and Hewlett-Packard Co. (HPQ) and a high debt burden are the concerns, we expect Lexmark to come back strongly with its increasing focus on software and services.

Currently, Lexmark has a Zacks Rank #3 (Hold). Investors can also consider NVIDIA Corp (NVDA), which sports a Zacks Rank #1 (Strong Buy).

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