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EFI & Jetrion: Good Deal for EFI, Bad Deal for Flint Ink
November
2006 — One of the major items of news in the past few weeks was the
planned acquisition of Jetrion by EFI. Jetrion is a specialized inkjet
printer company that was set up by Flint Ink in 2003. Previously Flint
Ink had carried out inkjet developments within its Digital Division.
This planned acquisition of Jetrion essentially raises two questions,
the first being why is EFI buying Jetrion, and secondly why should
Flint Ink be selling a company that operates in the fast growing market
of inkjet printing? The first question is relatively easy to answer;
the second may be more difficult.Before trying to answer those
questions I will first look at Jetrion and the products it offers to
the market. Jetrion is an inkjet product company and an inkjet ink
company.Up to the past month Jetrion was predominantly a supplier of
add on inkjet printing subsystems for conventional label and packaging
presses and mailing systems. These products, the Jetrion 3000 series
are small systems using Spectra piezo drop-on-demand printheads up to
2.4 to 14.4 inches wide that run at press speeds, imprinting single
color data onto a label, package or mail item using solvent or UV
curable inks. However I believe that the main reason for the EFI
acquisition is the new Jetrion product. A description of this is below
and this is taken from the Jetrion website.At the recent Labelexpo
event Jetrion launched a new digital UV inkjet press. The new Jetrion
4000 Series Inkjet System delivers full-color labels in production
volumes with quality comparable to flexography, and production costs
significantly lower than current digital color presses. Developed for
short- and medium-length narrow web production runs, as well as
variable data imaging, the Jetrion 4000 series of digital inkjet color
presses are stated to give label converters all the advantages of UV
inks coupled with the immediate and low-cost changeover of digital
printing. Because the only consumable required is the UV ink developed
and manufactured by Jetrion, usage costs of the Jetrion 4000 are
claimed to be significantly lower than those of other types of digital
color printing.The press utilizes advanced UV inkjet hardware and
Jetrion’s new UV4000 set of CMYK inks to print full-color labels at
fast digital speeds on an ever-increasing range of papers, films, foils
and small caliper tag stocks. Offered in widths of 4-, 6- and 8-inches,
the Jetrion 4000 fits a range of applications for short- and medium-run
batch and variable printing, including industrial, electronic,
automotive, shelf and shipping labels, as well as a range of tags,
tickets and forms. Jetrion has incorporated Xaar-based Leopard
grayscale printheads and high-performance UV-curing technology into the
turnkey printer.EFI already has a major commitment to the inkjet
printing market with its ownership of VUTEk, one of the leaders in the
wide and super-wide format display graphics market. One of the reasons
EFI acquired this company, apart from it being a profitable
organization, was to open up a new area of business which could link up
with its Fiery digital front end and PrintCafe MIS businesses. Recently
EFI has started to offer a Fiery front end with some of its VUTEk
presses. Linking VUTEk with Jetrion will build a very powerful inkjet
division. I believe that the move by Jetrion into making a digital
label press was perhaps the key development that made the acquisition
attractive. At present the only main players in the digital label
business are HP Indigo and Xeikon, both with xerographic presses. The
potential of an inkjet press in this market with its speed and running
costs appears very attractive.The following is part of the statement
from Guy Gecht, EFI’s CEO “Jetrion’s advanced technology and very
talented team are great additions to our inkjet business and are a key
element in fulfilling our strategy to expand our presence in the
industrial inkjet market. We are especially impressed with Jetrion’s
packaging and label printing expertise, and we see this as an emerging
market opportunity for digital printing given the increasing demand for
short-runs, variable content and fast turn-around in these segments.
In addition, the Jetrion and VUTEk development capabilities complement
each other quite nicely. Combining EFI’s leadership in precision color
and intelligent, high speed Raster Image Processing (RIP) technology
with the market-leading innovation of the VUTEk and Jetrion product
lines will give us multiple opportunities to share expertise,
benefiting all of our products.”There is however I believe considerably
more potential for this technology than just labels. We are now
starting to see the start of the arrival in the market of high and
medium quality inkjet color presses for a range of markets. The
capabilities of the combined R&D groups of Jetrion and VUTEk for
developing products for this market are high. For EFI this would
generate significant potential for sales of its latest high-performance
Fiery DFEs. At the recent GraphExpo exhibition in Chicago I met with
Fred Rosenzweig, EFI’s President and he indicated that EFI saw huge
potential in the industrial printing business. He believed that
bringing together the expertise of both VUTEk and Jetrion staff in both
the engineering and ink chemistry areas would generate major
opportunities for EFI to be a key player in this area of the market.The
reasons why Flint Ink is selling the business are less clear. The
following comment was made by Rita Conrad, Director of Corporate
Communications for the Flint Group in the coverage of this potential
acquisition in WhatTheyThink last week. “The timing was good for us,
and it is a very good match for Jetrion. For the Flint Group, it
strengthens our financial position at this particular time and allows
us some additional capital for investment. And it is in keeping with
the strategy for the Flint Group going forward. We are currently one of
the largest suppliers of inks and printing supplies in the conventional
printing marketplace, and that is where our focus lies. Both the
printing industry and the ink industry are consolidating. The industry
is changing—but we certainly don’t think it is going away. We intend to
be very strong in that arena.”For me this does not add up or perhaps we
are not hearing the full story. As the market is growing much faster in
digital and we are seeing a reducing demand for conventional printing,
why jump on the ship that is going slowly rather than the one that is
accelerating? It sounds like the bean counters are in charge and they
see short-term capital gain to be a better bet than long term business
growth. What are they going to invest this money in? Making more
low-margin litho ink? However since private equity company CVC Capital
Partners recently acquired Flint Ink, the company selling Jetrion, one
can perhaps understand the situation where such companies will prefer a
quick profit in offloading an area of the business that is not in the
mainstream and considered more of a future prospect than a current
profit earner.
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