Lexmark International (LXK) is a step closer to acquire ReadSoft after it bought a 35.4% stake from its founders, Lars Appelstal and Jan Andersson, at 57 Swedish Krona (SEK.V) a share, according to Reuters. In the process, Lexmark has also increased its bid from 55.5 SEK to 57 SEK. This is the fourth time Lexmark has raised its bid price for ReadSoft. Previously, in August, Lexmark agreed to pay 55.50 SEK a share to counter Hyland Software’s 55 SEK offer.
The current bid for ReadSoft is valued at $254 million, significantly higher than the original $182 million bid. Hyland is reported to be in control of 10.9% of ReadSoft shares. However, with the current 35.4% founders’ stake and 52.2% votes in its favor, Lexmark is well ahead in the race to acquire the company.
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 strategic as it will strengthen its position in the European business process management market. Reportedly, Gartner 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 operations. The valued clientele including John Deere, BASF and HSBC Bank is another positive.
We see strong 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 Stratasys (SSYS), which sports a Zacks Rank #1 (Strong Buy).