Lexmark is being acquired by a three-pronged Chinese consortium, and those new owners will put the company in business with an old rival and the world’s largest computer vendor.
It also puts Lexmark in the category of American companies that now have international owners — such as Sara Lee desserts, owned by the Mexican company Grupo Bimbo.
Apex Technology Co., PAG Asia Capital and Legend Capital Management will buy the company in a $3.6 billion all-cash transaction. After the transaction is complete, Lexmark’s common stock will cease to be publicly traded on the New York Stock Exchange.
Paul Rooke, chairman and chief executive officer of Lexmark, said on Tuesday that being bought by the consortium “provides a wonderful growth opportunity into Asia and China ... and we’ll strengthen their technology portfolio.” He said that the move is good for Lexmark employees, with Lexmark headquarters remaining in Lexington and few if any employees affected.
Here are five things you should know about the change in Lexmark ownership.
1. The merger puts Lexmark in the same ownership stable as an old rival.
Apex of Zhuhai, China, merged in 2015 with Static Control of Sanford, N.C. The two companies are the largest suppliers of components to the international remanufacturing industry, specifically ink and toner cartridge parts. Lexmark was long engaged in a court battle with Static Control over control of empty but refillable ink cartridges.
Lexmark’s Jerry Grasso said that the future relationship between the two has not yet been worked out and that Lexmark does not discuss litigation: “We’ve only announced the definitive agreement to merge ... I’m sure any concerns/issues will be worked out as we move through the process toward closing.”
2. The merger brings Lexmark closer to the world’s largest personal computer vendor — and to the remains of IBM’s personal computer division.
Legend Capital, the venture arm of Legend Holdings, owns the computer company Lenovo Holdings, the world’s largest personal computer vendor. Lenovo bought IBM’s personal computer division in the United States in 2005.
IBM, Lexmark’s industrial forerunner, was the dominant Lexington private employer of its day. In 1956, the company decided to build a 386,000 square foot typewriter plant off New Circle Road that employed 1,800 people. By 1985 IBM had 6,000 workers.
In addition to PCs, Lenovo also produces smartphones, tablets and smart TVs. It is the top PC company in China, Japan, Russia and Germany. The company has also launched a line of convertible PCs that combines features of both notebooks and tablets.
3. PAG Asia Capital is familiar with American companies — and North American investors.
Despite its Asian focus, PAG’s investors include some very American entities: The $103.4 billion Washington State Investment Board of Olympia committed up to $200 million to PAG’s second buyout fund.
PAG’s recent deals include buying out South Korea’s Young Toys and joining with TPA Capital and Ontario Teachers’ Pension Plan to buy out the U.S. commercial real estate services provider Cassidy Turley, which operates in about 30 major U.S. metro markets and was one of the largest in the commercial real estate business in the Cincinnati-Dayton region.
4. PAG may not be dead-set on the “no change” mantra in the long run.
While the Lexmark chairman and chief executive officer said that business as usual should rule the day as Lexmark merges with the various investors, the capacity for change in leadership is always present.
Weijan Shan, chairman and CEO of PAG, said in a 2013 interview with the Asian Venture Capital Journal that “If a founder wants to sell 100 percent you have some concern as to whether or not there are skeletons in the closet. Typically you don’t want him to get out immediately. You negotiate a deal so that he will stay for a period of time until you are comfortable.”
On Tuesday, Shan was projecting big ambitions for Lexmark globally: “We look forward to turning Lexmark into a market leader not only in the U.S. but also in Asia.”
5. More “American” companies have international owners.
In the 2013 book Brand Breakout: How Emerging Market Brands Will Go Global, Nirmalya Kumar and J. Steenkamp write that global brands can take any of eight routes to expansion. The Lexmark acquisition would be an example of “the brand acquisition route.”
Brands cited using this route to grow include Bimbo Bakeries of Mexico, which now owns Entenmann’s and Sara Lee baked goods and Ball Park franks.
Tata Motors of India, which in 2008 introduced the Tata Nano, the world’s cheapest car at around $3,000, bought the South Korean truck manufacturer Daewoo Commercial Vehicles in 2004 and Jaguar Land Rover in 2008.
Geely of China has owned the Swedish car maker Volvo since 2010 and bought the London Taxi Company automaker in 2012.
The Harvard Business review said in a 2011 article that after early attempts to buy global brands and sales networks failed, Chinese companies re-focused their efforts on buying concrete assets, advanced technologies and research and development facilities. Such acquisitions are used to strengthen the companies’ positions in the Chinese market, according to the business review.