X-Rite Buys Swiss Firm For 280M
GRANDVILLE — For color expert X-Rite Inc., the hills are alive with the sound of supply-chain color management. The Grandville firm last week announced its plans to purchase Swiss firm Amazys Holding AG, whose GretagMacbeth products compete with X-Rite’s in the European market.
X-Rite CEO Michael Ferrara told the Business Journal that the $280 million sale will bring new markets to the company, healthy returns to investors, and new manufacturing jobs to West Michigan.
“This combination is going to grow. There’s going to be jobs,” he said. “We’ve committed publicly to this state a certain job count, and I think those numbers are going to be even more realistic to us over the next few years with the addition of GretagMacbeth. I am very enthusiastic about that. I think it’s going to be a real cornerstone for West Michigan in terms of employment.”
The boost to West Michigan’s economy may be a welcome fringe benefit, but the real strength of the purchase comes in the new growth opportunities that X-Rite will be able to exploit.
“The No. 1 goal that we hope to get out of this combination is to get innovation,” he said. “The whole thing about the color business is that, if you can invest in technology to drive costs down for our customers, you open up new markets.”
By combining the two companies, they will cut out duplicate research costs and shift more funds into developing their strongest markets. But there is no need to wait around for research and development to pay off. Ferrara said that there are immediate opportunities.
For example, X-Rite has a vertically integrated manufacturing facility. Amazys, on the other hand, is in the business of assembling products from components it acquires from sources around the world. Amazys’ products will benefit from X-Rite’s manufacturing expertise, while X-Rite can take advantage of Amazys’ hardware and software sources throughout Asia and India.
“This is an opportunity for our company to enjoy that result from their expertise,” said Ferrara. “And that’s going to help us with the margin line. And further, it not only helps with the margin line, but it gets back to this expand-the-market issue, because you’ve got the ability to manufacture at a lower cost position to expand the market. It goes both ways.”
X-Rite will also be picking up a couple of important clients out of the deal. Ferrara said that Amazys has strong partnerships with Hewlett-Packard Inc. and German print technology juggernaut Heidelberg Printing Machines GmbH. The merger will also expand X-Rite’s business with Wal-Mart Inc.
“We’re the standard for Wal-Mart in the store, for paint, at the point-of-sale,” Ferrara said of the current X-Rite. “(Amazys is) the standard for Wal-Mart’s supply chain management — and Target, I understand.”
That means that the new X-Rite will not only be making sure that every gallon of “Cinnamon Latté” paint going out the door is the right color, but that the smiley faces on the Wal-Mart bags and the red shirts on the Target employees are the right hue as well.
“Everything we wear, everything we buy is color-matched,” he said. “And you’ve got to get the guys in Bangladesh all doing the same thing. So it’s a big deal. (Wal-Mart supply chain managers) demand you get color accuracy through instruments, and hardware and software. So that’s a significant opportunity for both companies.”
While there are plenty of growth opportunities in the long term, X-Rite’s short-term goal is to close the transaction and begin the consolidation of the two companies. Ferrara said that he hopes to see the deal finished by late spring. Once the regulatory and financial transition is complete, he said that the company will retain the X-Rite name, though it will continue to use the valuable GretagMacbeth brand for certain products in Europe. The company’s headquarters and manufacturing facilities will stay in West Michigan. The erstwhile headquarters of Amazys in Regensdorf, Switzerland, will become the technology center and European headquarters for the combined company.
Ferrara expects the transition to take roughly 18 months from the closure of the sale.
“The first year is going to be difficult, because we’ve got a lot of work to do to restructure the company,” he said. “But I’d say you’ll start seeing some real trends, some consistency in the new structure in ’07.”
The company’s stock, which is traded on the NASDAQ exchange, was up 1 percent on the news of the purchase.