Applied Graphics To Buy Devon In $440 Million Deal
Applied Graphics Technologies Inc. on Tuesday said it agreed to buy Devon Group Inc. for $440 million in cash and stock. With the deal, AGT will become by far the nations largest provider of outsourced digital image management and digital prepress services to publishers, retailers, advertising agencies and automobile manufacturers. We will emerge as the dominant force in the retail arena, as well as publishing and advertising, said Fred Drasner, chief executive of Applied Graphics. AGT, with 1997 revenues of about $185 million, said it would look for further acquisitions. Devon, whose clients include leading retailers Sears, Roebuck & Co. and Kmart, is one of the largest digital prepress companies in the United States, through its Black Dot subsidiary. Reuters
Under the agreement, Devon shareholders will receive, for each Devon share, $30 in cash and a tax-free distribution of 0.6 of a share of AGT common stock.
Wall Street took a rosy view of the merger, sending Devon shares rocketing $14.125, or more than 30 percent, to $60.625 on Nasdaq. While the stock of acquiring companies usually falls, Applied Graphics shares rose $2.375 to $52.50 on Nasdaq.
Aligning with Devon is very advantageous, said Merrill Lynch & Co. Inc. analyst Robert Curran, who had upgraded Applied Graphics to a near-term buy just ahead of the merger news, based on strong industry fundamentals.
Louis Salamone, Applieds chief financial officer, said he did not expect heavy merger costs to dilute earnings.
If we close the deal in May or June, it should be accretive for 1998, he told Reuters. And, looking ahead, it should continue into 1999 on a full-year basis.
The deal is expected to close in the second quarter, subject to shareholder approval from both companies.
Devon Chairman and Chief Executive Officer Marne Obernauer Jr., holder of close to 12 percent of Devons shares, will become vice chairman of AGT and a director.
The combination with Devon will continue AGTs strategy of expanding its nationwide facilities management business.
The combined entity will give us a solid platform for further high-quality acquisitions as we continue to consolidate this fragmented industry and provides a tremendous opportunity for us to fuel continued rapid organic growth, said Drasner.
In addition to being Applied Graphics CEO, Drasner is co-publisher of New Yorks Daily News with Mortimer Zuckerman and CEO of magazine U.S. News & World Report.