The announcement of a hostile bid for Roland DG by Brother Industries, against the private-equity backed MBO, is deserving of close inspection. Using supplementary information from Brother, Andy McCourt looks at the offer and finds, in his opinion, that if successful, we could be looking at the creation of another HP, Epson or Fujifilm-sized supplier to our changing industry, and one that offers diversification opportunities into Industrial markets.
Brother Industries' Philippines factory. Brother has 7 manufacturing sites in Japan and 7 more across Asia, Europe and North America
Brother's tilt at buying Roland DG is not just a counter-offer. It is a carefully structured and analysed strategy with projections to 2030 - on a global scale.
For some time, Brother has existed 'outside of the tent' of our core signage and display industry - with the exception of DTG/DTF printers capably distributed by GJS in Australia, who also offers Epson and Roland DG printers. On a global scale, Brother is a major force in sewing and embroidery machines, office A4/A3 printers, MFDs and label printers of the marking and identification kind used in offices, warehouses and homes. However, Brother does own Domino Print Sciences of the UK, which puts them in the high-end of digital label printing as well. It is also engaged in software development, electronics and machine tools.
Roland DG has also recently revamped its flatbed UV offering with the EU-1000MF, and also brings to the party its majority stakeholding in Dimense, the texture-printing & wallpaper wide format printers from Estonia.
Significantly, Brother has developed its own inkjet printheads, the Maxidrive and 1200dpi Bitstar for the wide format, textile, MFP and label sectors. Domino's generation 7 label press, the N730i, deploys multiple Bitstar printheads for UV ink.
Brother's own printheads
The name 'Brother' stems from its founders, the Yasui brothers who, in 1908 commenced manufacture of sewing machines. For the full 2024 year (ending March 31st) Brother is on target to reach ¥820 billion Yen in revenues (approx. $8.4 billion Australian dollars). Listed on the Tokyo Nikkei stock exchange (TYO), Brother's shares are currently performing strongly, as well as profitability before and after tax.
The offer to buy Roland DG has topped the Taiyo XYZ Group, L.P. offer by ¥2 billion Yen at, currently, ¥64 billion against Taiyo's ¥62
Roland DG corporate HQ billion (approx. USD$477 million). The Taiyo bid is essentially an MBO with Taiyo as the backer and Roland would de-list from the TYO stock exchange and be privatised if successful. Most private equity investors have an exit strategy of 3-5 years for their funds, to show better-than-bank-interest profits to fund members.
Brother Industries' offer would keep Roland listed on the TYO stock exchange - as a subsidiary of Brother. Apart from wide format printers for signage, Roland would bring industrial object printers, 3D printers and Dental fabrication/milling machines into the fold.
A strong, industrial vision towards 2030
What is striking about Brother's supplementary information to its offer to buy Roland DG is its forecasts to transform the company from a mainly consumer-driven revenues to 50% industrial by 2030. 'Printing' remains static - almost no growth at all. However, Industrial is more profitable and often involves print technologies. The diagram below clearly explains this:
By 2030, Brother forecasts that 50% of its revenues will be from 'Industrial' while 60% of its profits will come from this sector. 'Printing' remains static, but 'Industrial' involves print.
Research and development
Brother's offer promises to provide an enormous boost to Roland's R&D potential. Brother employs around 2,260 personnel in R&D alone and spends more on R&D annually, than Roland's entire global revenue of around USD$370 million. Roland DG has already benefitted from Brother R&D by incorporating the Bitstar printhead into its AP-640 Resin/latex wide format printer and vice-versa in Brother's OEM version, the WF-1.
Keeping the brand & management
As it has done with Domino, Brother proposes to retain the Roland brand and management, apart from appointing directors to ensure corporate governance. In its supplementary bid information, it stated:
"In principle, we have no plan to renew or change the current management structure including the representative and employment conditions for employees."
Roland DG has a good global dealer and direct channel network, which Brother says it will retain but Brother's is much wider and can be leveraged to expand distribution.
Differences in the bids
Apart from sheer price-per-share advantage there are other differences in the offers. Brother Industries will activate its share offer once 50% of shares have been agreed for aquisition, following which a 'squeeze out' share purchase period will begin, acquiring further shares on and off-market. The Taiyo XYZ offer requires 66.66%
Brother's offer differentiation is shown in the following chart:
While the current sentiment of the Roland DG board is to prefer the MBO backed by Taiyo, further analysis of the Brother offer is underway and a decision, or revised offers, is expected this week.
However, the fit into Brother Industries appears to offer a more secure future. Brother is well cashed up. would keep the present name and management team, provide access to deeper R&D, Sustainability and an enviable global distribution chain.
It's possible a bidding war might eventuate, Roland DG is a prize catch and, who knows, maybe a third party might interlope.
As things stand, the Brother offer appears to offer more on all fronts and, if managed well, which appears to be in the plan, could create a new top-three harware and consumable supplier to service the wide format industry. Brother has a stated ambition to be the "number one supplier" - time will tell.
Also, Brother is a highly philanthropic company, donating large sums to The Red Cross, Ukraine, flood, earthquake and famine relief.
Andy McCourt
