Kofax to Be Purchased for $75 Million in Cash


Irvine-based Kofax Image Products Inc. said Wednesday that it has agreed to be acquired for nearly $75 million in cash by a British holding company and a German bank.

The deal, financed largely by the American investment arm of Dresdner Bank AG, marries Kofax's technology for digitally capturing and storing documents with the distribution strength of Dicom Group Plc of Berkshire, United Kingdom, which has been changing its focus to develop more products and services.

Dicom's $12.75-a-share offer is higher than Kofax has ever traded in its two years as a publicly held company. Kofax shares rose $3.06, or 33%, in heavy trading Wednesday, to $12.44.

Kofax, which employs about 135 people in Irvine and another 35 in offices across the country, will remain in its headquarters on Jenner Street and no major changes to either personnel or operations are planned, said Ronald Fikert, Kofax's chief financial officer.

For the 12 months ended March 31, Kofax earned $4.2 million on sales of $37 million. The company has had 10 consecutive quarters of earnings and revenue growth.

But Kofax has had difficulty attracting interest from the investment community, with few financial analysts following the company, Fikert said. Kofax officials decided to sell to the larger Dicom in part to enhance its image. Dicom, which has about 350 employees, lost $1 million on revenue of $105 million during the fiscal year ending June 30, 1998.

"This increases our international presence dramatically," Fikert said. "Our company has just been undervalued and underfollowed, and it's just been very frustrating. It's very difficult to do acquisitions and grow with your stock when your stock is at $8."

The acquisition of Kofax is the first foray into North America for Dicom, which derives more than 90% of its sales from Western Europe.

Dicom, which has strong distribution capabilities, has said that it wants to move into more profitable "project-oriented" areas in document imaging and storage.

While Kofax will not be the largest of Dicom's operations in terms of revenue, it will be tops in operating income, with $5.5 million in the year ended March 31.

To finance the acquisition, Dresdner Bank will underwrite a $60-million debt offering, and the investment group, which includes some Kofax managers, will invest an additional $21.3 million in Kofax.

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