Italian firm to buy Eugene's PSC.

Byline: Sherri Buri McDonald The Register-Guard

PSC Inc., a Eugene-based bar-code scanning company, plans to become part of a growing Italian corporate family.

The private equity firm that has held PSC for the past three years has agreed to sell it for $195 million to Datalogic SpA, a competitor with headquarters near Bologna, Italy, the companies announced Monday.

The deal is expected to be completed in 30 to 60 days, subject to approval by federal antitrust regulators, said Jack Farrell, PSC's president and chief executive.

Business should continue as usual for the 530 employees in Eugene, Farrell predicted, adding that Datalogic plans to keep PSC as a free- standing business unit with headquarters in Eugene.

"It's very good for the employees in Eugene," Farrell said.

Datalogic was "adamant about keeping the name, the brands, the employees and the management team," he said.

The move also gives some long-term stability to PSC, which knew it was only a matter of time before the Connecticut-based private equity firm, Littlejohn & Co., would put it up for sale.

Combining Datalogic, which had $177 million in revenues last year, with PSC, which had $228 million in revenues, will boost the combined firm's market position. It will have the third largest revenues, behind market leader Symbol Technologies, based in Holtsville, N.Y., and Intermec Technologies Corp., based in Everett, Wash., Farrell said.

The acquisition also gives Datalogic, the leading scanning manufacturer in Europe, a foothold in the United States.

"Datalogic has very little business in the U.S., and limited business in Latin America and Asia Pacific," Farrell said. "They pick up a lot of distribution in areas they weren't in before."

Rick Morgan, editor of Scan: The Data Capture Report, a trade publication based in Erie, Pa., said the price seems steep, but it could well pay off for Datalogic.

"It seems like at that kind of money that's a lot to pay just to get your foot in the door, but that money could come back real quick," Morgan said.

Farrell said that he doesn't anticipate the flurry of cuts and consolidation that often occur after acquisitions because the businesses complement each other - there isn't a lot of overlap in their products or areas of distribution.

Datalogic's strength is in hand-held scanners in Europe and industrial fixed scanning systems used by large customers, such as national postal systems.

Fixed retail scanners have been PSC's forte.

As a practical matter, this is the largest acquisition Datalogic has made, which would suggest that the Italian company wouldn't be quick to institute broad scale changes at PSC, analysts said.

"They would be challenged to move too quickly on an organization this size, forcing any kind of a major overhaul," said Chris Quilty, an analyst covering the data capture industry for Raymond James & Asso- ciates.

Quilty said he thinks the acquisition should be viewed "as a generally positive combination between the two companies, given a larger breadth of product offerings, markets and capabilities."

The acquisition caps off several years of tumultuous change at PSC.

Littlejohn & Co. bought the debt-burdened and financially ailing PSC in November 2002. As part of the bailout, Littlejohn paid PSC's lenders an undisclosed amount to drop their claims to $124 million that PSC had borrowed from them.

PSC also filed for bankruptcy protection, and emerged from bankruptcy in June 2003, transforming itself from a publicly traded company to a privately held one.

"The shape they're in today is light years better than a few years ago," said David Krebs, mobile and wireless group director at Venture Development Corp., a technology market research firm based near Bos- ton.

Farrell came on board as president and chief executive in late July 2004. From 2002 to 2004, PSC showed strong revenue growth. Annual revenues shot up from $169 million in 2002 to $228 million in 2004, Farrell said.

The deal with Datalogic came together relatively quick- ly, he said. PSC started to look at its strategic options three or four months ago, and hired an investment banking firm to help it develop a proposal for buyers, Farrell said.

Datalogic is no stranger to PSC. Romano Volta, chairman of the holding company that owns Datalogic, and the holding company itself were PSC's largest shareholders before Littlejohn bought PSC and the company became privately held.

Datalogic plans to buy PSC using a combination of cash, sale of equity shares and bank loans. Datalogic will use $24 million in cash; it hopes to raise $76 million by selling shares to existing investors; and it will borrow $95 million in bank loans, the company said.

Datalogic is well positioned financially to acquire PSC, Farrell said. "They have a very strong balance sheet and have very strong banking relationships," he said. "From a balance sheet perspective, even with this acquisition, they're in very good shape."

PSC TIMELINE

1969: PSC Inc. founded as Photographic Sciences Corp., making photographic reproductions for microfiche.

1996: PSC pays $140 million to buy Spectra-Physics Scanning Systems Inc., which had a 535-employee factory in west Eugene.

January 2000: PSC buys Percon Inc. - a Eugene-based, 120-employee bar-code scanner maker - for $58 million

November 2002: Littlejohn & Co., a Connecticut-based private equity firm, buys PSC. As part of the agreement, PSC files for bankruptcy protection.

June 2003: PSC emerges from bankruptcy and transforms from a publicly traded company to a privately held one.

October 2005: Italian bar-code scanner manufacturer, Datalogic SpA, announces agreement to buy PSC for $195 million.