Kodak takeover ends Creo's divisive boardroom saga.

Despite their North American connections, both Vancouver-based Creo Inc. and Eastman Kodak of Rochester, NY, obviously have global ties that transcend national borders. That's why news of Kodak's proposed acquisition of Creo has stirred up so much interest across all sectors of the European graphics industry. The deal will mark the completion of a $3 billion digital printing growth strategy that began in September 2003 to counter declining sales in its traditional film and camera business. As it is, Creo has a huge European operation based in Waterloo, Belgium, arising from its takeover of Scitex Graphics a few years ago. It also has many service offices throughout Europe (many non-users don't know that it's Canadian by origin). In fact, just over half of Creo's revenues come from users in Europe, the Middle East and Africa. Many of these customers will also be aware of the irony of the situation, for Kodak's action allows Creo's board to avoid a messy ownership battle with dissident shareholders.

First, it must be recognized that Kodak's impressive shopping list is a positive vote of confidence in digital printing technologies. Last year it bought Scitex Digital Printing with its Versa-mark high speed inkjet printing capability. Relieving Heidelberg of its unwanted 50 percent stake in the NexPress digital press rekindles interest among offset printers. On January 12 it revealed a plan to buy Sun Chemical's 50 percent stake in Kodak Polychrome Graphics for about $817 million. The Creo deal is even larger, at $980 million in cash. It will form part of Kodak's Graphic Communications Group within the newly formed Graphic Solutions and Services business unit headed by Jeff Jacobson, KPG's chief executive.

Shareholders vote on the deal at a rescheduled annual and special meeting on March 29. Creo had orginally planned this meeting for February 10; on the agenda were corporate governance issues arising from plans to restructure the company by dissident shareholders, led by two investment firms. A proposal for a $60 million reduction in Creo's cost structure was one issue: R & D spending and staff employment were likely targets.

Until Kodak stepped in, the dissidents seemed to be winning and a bloody fight was expected. They had gained support from other shareholders, whose challenge to the Creo board had seen the share price leap to a 52-week high. Analysts had flagged up a "buy" rating on the basis of a speculative gain and forecast that a victory for Creo's board would reverse this gain. Andrew Tribute, an authoritative UK-based digital prepress consultant and journalist, commented: "... it's a typical asset-stripping and bean-counting approach generating a relatively immediate return to shareholders." He recalled that Robert Burton of Burton Capital Management--who would have led a new Creo board as chairman and CEO--typified this approach when at the helm of Moore Corporation.

In an official statement, Amos Michelin, Creo's combative CEO and target for the dissent, said shareholders could expect to benefit from Kodak's proposal, although he was talking from a different financial perspective: "The economy of scale gained by combining resources will allow us to speed up product development and deliver new innovations and breakthrough solutions to the market. Kodak also stands to gain a great deal from this transaction, including direct access to the largest installed base of computer-to-plate and workflow systems in the world."

Integrating Creo along with all the other disparate businesses that make up Kodak's Graphic Communications Group will not be easy. Also, with a bid offer of $16.50 a share, shareholders will want Kodak to maintain the momentum, which could still include major cost-cutting programs. This raises some interesting questions. Will Kodak retain the present Creo board, as shown with its other acquisitions, or will it change it? What happens to Creo's expansions to its CTP offset plate operations, based on a second plate line in the USA and another in Germany, now that KPG has an even stronger link with Creo users for its plates and consumables? Can Kodak build on Creo's move into the label and packaging sector, based largely on the Thermoflex range of CTP flexo platesetters and Prinergy workflow systems?

For Creo's global customers, the Kodak deal still looks like the best option to ensure a generally high level of support in all areas. Naturally their interests--and those of Creo's employees too--were the least of concerns for the dissident shareholders and their supporters to worry about. As often argued, shareholder power is all very well, but it can lead to damaging short-termism that conspires to threaten a company's very existence. Good thing the guys in the white hats arrived when they did.

* Creo has just announced its first quarter results for 2005 (actual quarter ended December 31), said to be the highest in its history--up 12.4 percent over the previous year to US$175 million (US$155.3 million for the same period last year).

Fuji Photo Film acquires Sericol

As if by coincidence, Kodak's arch-rival Fuji Photo Film Co. Ltd. is also pulling the plug on industrial and consumer photographic products. This time the target firm is an ink maker. Fuji has signed an agreement to acquire Sericol from an investment group led by Saratoga Partners (which had acquired it from BP Chemicals some years before). It has long been known for its screen inks and other consumables. About four years ago it expanded into the UV flexo inks sector.

Fuji-film plans to operate Sericol as one of the key business units within its printing business. The current management, including Ed Carhart, CEO, will remain with the company. The company's global headquarters is in Broadstairs in England, and its main manufacturing facilities are in Broadstairs and Kansas City in the US. Other plants are located in Australia, India, China and Brazil, backed by offices throughout Europe and in Canada, Hong Kong, Japan, Mexico and Taiwan. The company has 1,200 employees worldwide.

Joint venture increases RFID productivity

The Dutch firm Stork Prints and Spraylat GmbH, a German producer of silver coatings, have developed a method of using rotary screen printing to mass produce RFID circuits with speed and accuracy. It uses Stork's familiar 16" wide RSI (Rotary Screen Integration) unit to print 6"X1" di-pole antennae using new types of conductive inks formulated by Spraylat. The top speed of 100 fpm is said to represent a significant improvement over previous productivity levels using screen printing.

The collaborative project took place at Stork's Boxmeer facility and was commissioned by Rake Security Label in Germany. It had been chosen by Metro, a large retailing group, to supply 20,000 labels to test the effectiveness of RFID in managing pallets and cases within the retailer's supply chain.

Rake carried out subsequent conversion processes at its Witzhave works, inserting the inlays with a 2,024-bit microchip on a Muehlbauer "pick and place" Tag Module Assembler (TMA) machine. It was found that the inlay designs could operate effectively over a wide range of pallet contents, locations and angles. The UHF labels operate at 868 MHz with a read/write functionality of just over nine feet. Antenna inks were 5 microns thick and printed on a 60-micron PET pearlescent substrate. Stork's pure nickel RotaMesh 215 screen, which can be reused or re-engraved up to 15 times, was employed.

"To meet the high-growth demand for RFID, label industry players have to pool resources and explore ways of increasing productivity," says Thorsten Wischnewski, head of the RFID-technology group at Rake Security Label. "The collaboration with Stork Prints and Spraylat had this aim in mind and makes us well placed to offer large volume RFID label orders with relatively short lead times." Stork printed the 20,000 batch of antennae in two hours.

Swedish converter sued over folding label patent

The world of leaflet/labels, extended text labels and the like has always been highly litigious, and Denny Bros. Ltd. the quickest to reach for the lawyers. This time the UK holder of Fix-a-Form folding labels patents is suing the Swedish label manufacturer AB WH Nordvall & Co. for infringing its patents. At the District Court of Stockholm, Denny Bros. demanded an immediate stop to the infringement, as well as substantial damages.

The Swedish printer is supposed to have copied the Fix-a-Form design and used the product in sales to pharmaceutical manufacturers in Sweden. Denny says this caused substantial losses, both for the Fix-a-Form organization in Sweden and for CCL Label A/S in Denmark, the licensee. Denny Bros. has demanded 6 million Swedish krona ($845,000) in damages for claimed losses. It is also demanding that Nordvall cease production of the infringing product and destroy existing stocks of it. It is demanding a penalty of 500,000 krona ($70,000) if this is not complied with.

Andrew Denny, managing director of Fix-a-Form International Ltd, says: "We will not tolerate infringement of our patents. That's why we've taken legal action. We want to protect our patents, because we and our partners have invested considerable resources in developing the folding label concept." CCL Label in Denmark holds the Fix-a-Form license for Denmark, Finland, Iceland, Norway, Sweden, Poland, the Czech Republic and the Baltic states.

Nestle implements PDF workflow

Nestle is using a Certified PDF workflow for its packaging operations. It explained the benefits of this standard file format at a conference that took place in early March in Brussels. Following the completion of successful trials at Nestle France with a design agency and two prepress houses, the company plans to extend this system to all its European subsidiaries.

"The benefits we experienced convince me that what we have achieved in France will be copied throughout the packaging industry," said Christian Blaise, business project manager. "They included a huge reduction in errors and the number of transmission of files required between designer, brand owner and prepress house. Productivity increased, resulting in a faster route to market, and the ability to monitor and track all job changes when they occurred. We have all been delighted at the decrease in the number of meetings required to progress a packaging job and by the fewer production problems encountered. Certified PDF has broken the barrier between design and production."

Artwork Systems hosted the conference. Its Enfocus Software division pioneered Certified PDF for brand owners, designers and printers (as described in the January/February 2005 issue of Label & Narrow Web, page 31).

* Nestle, in collaboration with UPM Rafsec and Sato, has developed an automated pallet labeling method using UHF RFID tags.