Kodak GCG  chemicals  mergers & acquisitions 
Eastman Kodak has begun the process whereby it will become the sole owner of Kodak Polychrome Graphics (KPG) through the purchase of Sun Chemical Corporation’s 50 per cent interest in the joint venture. The KPG joint venture was established in 1998, with Kodak and Sun Chemical taking a 50-50 stake. The transaction will immediately increase Kodak’s sales and earnings while expanding the global distribution network for the digital printing systems made by its Graphic Communications Group and broadening the company’s solutions portfolio.

Kodak will pay Sun Chemical US$317m in cash at closing in April 2005 for its share of the company - US$200m in cash in the third quarter of 2006 and US$50m in cash annually from 2008 through 2013, for a total of US$817m. The company will be run as a wholly-owned subsidiary of Kodak.

This appears to be a very smart buy for Kodak. Not only does it keep in line with Kodak’s push to become a major force in digital printing systems, KPG’s revenues for 2004 are expected to be US$1.7bn. Kodak expects this transaction to add approximately US$1.1bn to Kodak’s revenue in 2005 alone, reflecting approximately nine months of Kodak ownership, and the elimination of inter-company sales from Kodak to KPG. In 2006, Kodak expects approximately US$1.4bn of incremental revenue, reflecting a full year of ownership and the elimination of inter-company sales.

Daniel Carp, Kodak CEO, says, “Kodak Polychrome Graphics is an established leader in supplying products and solutions to the graphic communications industry.

“This transaction, which is immediately accretive to earnings, is another decisive step in the implementation of our digitally oriented growth strategy and strengthens Kodak’s ability to compete in the fastest-growing segments of the industry.”

KPG will provide Kodak with an innovative product portfolio, a strong sales organisation, and established relationships in the commercial printing segment, the largest market opportunity within the graphic communications industry, says Carp.

Antonio Perez, Kodak president and COO, says, “One of the key elements of our strategy involves smart acquisitions that complement Kodak’s existing capabilities and enable us to drive profitable digital growth.

“Bringing KPG together with Kodak’s existing graphic communications businesses – Kodak Versamark, NexPress and Encad – will enhance our operations, extend significantly our coverage worldwide, complement our present portfolio, and strengthen Kodak’s ability to serve our customers in the fast-growing graphic communications market.”