The Hindu Business Line : Gestetner, Ricoh merger at 1:6 share swap ratio

IN a bid to improve operational efficiencies and profitability, and aim for a dominant position in the market, office automation companies Gestetner India and Ricoh India, both subsidiaries of Ricoh Japan, have decided to merge into a single entity.

The merger, which has been approved by the board of directors of the two companies, entails a swap ratio of 1:6, that is, six shares of Ricoh India for one share held in Gestetner India on the record date.

The Scheme of Arrangement also involves restructuring the capital of the combined entity, as part of which the parent company Ricoh Company Ltd has decided to waive Rs 10.6-crore of arrears of preference share dividend of Ricoh India.

Elaborating reasons for the merger, Mr K. Swetharanyan, Managing Director, Gestetner India Ltd, said, "Our product portfolio included stencil duplication business, digital duplication products and office equipment such as digital multifunction devices, while Ricoh India's product line had copiers, colour printers and fax machines. The two companies dabbled in the same market space, and a merger was logical as the back-end resources can be leveraged to reach the customers."

Post-merger, Ricoh Japan expects the revenues of the combined entity to double by 2007 from the existing Rs 150 crore. The merged entity would also aim at increasing its market share in India to 30 per cent over the next three years, from 22 per cent.

"With rapid technological strides, we are not only competing with office automation companies like Canon and Xerox but also IT players like HP," Mr Swetharanyan said.

The feasibility study regarding the merger was carried out by Ernst & Young and the merger is expected to be completed by March 2005.

The merged entity would be called Ricoh India Ltd, but the new management structure is yet to be finalised. However, the employees of the two companies will be merged.

At present, Ricoh Japan holds 63 per cent stake in Gestetner India and 76 per cent stake in Ricoh India. Post-merger the promoters' stake in the new entity will stand at about 73.5 per cent.

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