EFI Extends its Reach into Textile, Grand-Format Segments via Acquisitions

On July 1st, EFI made two announcements: One was the acquisition of the Israeli Matan Digital Printer, a supplier of grand-format printing solutions, and the second was the acquisition of Reggiani Macchine, a supplier of high-end textile printing equipment.

Both acquisitions are part of EFI’s stated strategy to invest and grow its product portfolio in adjacent markets and technologies. Workflow and inkjet have been at the forefront of acquisitions by EFI in the past and is likely to continue in the future as this strategy evolves. This strategy enables EFI to leapfrog some graphic arts suppliers and enter into industrial segments that are emerging as adopters of digital technology as a means to dramatically change their respective industry segments’ supply chains and transition mass production markets into mass customization digitally enabled segments.

Getting into Digital Printing of Textiles: EFI Acquires Reggiani Macchine

Reggiani Macchine is an Italian industrial inkjet machine manufacturer in high-end textile manufacturing solutions with a global presence in the fashion and home textile sectors. EFI’s acquisition is comprised of up to $53.4 million in cash (including $22.6 million in debt payoff) plus $30.8 million in EFI stock. In addition, it will pay up to $56.2 million based on the new business achieving profit and revenue targets over the next 30 months.

Reggiani Macchine was founded in 1948 and is based in Bergamo, Italy. Reggiani’s capabilities are anchored in industrial manufacturing. The company is a manufacturer of both traditional rotary, screen printers, pre- and post-treatment machines, as well as what is now a broad range of digital inkjet textile printers. In 2014 the digital range represented around 75 percent of its revenue. EFI, in their commentary, noted that Reggiani derives some of its revenues from ink and that 40 percent of Reggiani’s customers use its branded OEM inks—a statistic that could be driven up under EFI’s ownership as their current strategy is to maintain a high attached rate of OEM ink sales, as it does with its VUTek wide-format installed base. This will likely extend EFI ink manufacturing capabilities further to include the dye- and pigment -based inks needed for textile printing.

Reggiani ReNOIR Compact - Dye Sublimation Paper Transfer Solution.

The move, which will see Reggiani machines re-branded as EFI Reggiani, will elevate EFI’s ability to serve the fast growing industrial textile printing sector. The company sees opportunities to develop its existing VUTek graphics customers into soft signage and other textile applications with the Reggiani printers, as well as leveraging synergies in R&D and manufacturing capabilities in ink and raster image processors (RIPs). Former Reggiani board member Ambrogio Caccia Dominioni will become the managing director of the new EFI Reggiani bringing with him Reggiani’s 190 employees worldwide.

EFI cited InfoTrends and 2015 FESPA Print Census research as affirmation of its strategy where growth and investment in textile printing were indicated as top priorities by print providers around the world. Citing the InfoTrends Digital Textile forecast, EFI noted that the 35 billion square meter global printed textile market provides an opportunity for industrial inkjet market expansion that is four times greater than that of the ceramics market (where EFI is already present via EFI Cretaprint). This move by EFI follows several acquisitions and partnerships in this segment, including those by Dover, Epson, and Konica Minolta. Other major graphics OEMs also now active in the textile market are Mimaki, Mutoh, and Roland. InfoTrends’ 2014 to 2019 forecast of the digitally printed textiles market (roll-to-roll devices) puts the compound annual growth rate (CAGR) at more than 30 percent.

Expanding its Footprint in Grand Format Inkjet: EFI Acquires Matan

Matan Digital Printers is based in Rosh HaAyin, Israel and manufactures grand-format UV printers. For over a decade, Matan has produced three- and five-meter wide roll-to-roll grand-format digital inkjet printers for the sign and industrial markets. Though its products are primarily sold outside of the U.S. market, Matan has maintained a strong position in the grand-format digital printer segment.

A purchase price was paid to the sellers of $29 million in cash and an additional $14 million is being held in escrow. There is a debt assumption of approximately $5 million. EFI notes that the acquisition gives them a broader range of products in superwide-format display graphics printing. However it’s interesting to note that Matan has a product line utilizing sublimation transfer printing of label and reflective signs for industrial applications. EFI also values Matan’s inkjet R&D capability and adds that the move fills a spot in EFI’s portfolio for lower-acquisition cost roll-to-roll production printers for labels, signs, banners, billboards, and fleet graphics.

As the market shifts from the use of solvent inks, EFI has been fast to capitalize on opportunities in UV curable inkjet. These include a range of products using LED curing, as well as a variety of new inks. The acquisition of Matan helps EFI solidify its installed base with 270 additional grand-format units from Matan and the potential to grow into the low- and mid-market areas.

InfoTrends Opinion

These acquisitions are part of EFI's ongoing strategy to use its cash balance to add annuity-based businesses into its portfolio and leverage its strong workflow solutions to provide added value to these emerging markets and technologies. EFI says that it will continue to investigate investment opportunities that align with its strategy and drive profitability and growth. From an equipment supplier perspective, these included Cretaprint, Jetrion, VUTek and now Matan and Reggiani.

The Reggiani acquisition ushers EFI into the booming digital textile market, as well as instantly providing EFI with sublimation printing capability for the sign and display market. Early in 2015, Reggiani announced a range of products aimed at expanding its presence in this space including new solutions for sublimation and pigment inks. According to EFI, about 40 percent of Reggiani users buy ink directly from the company however, in the textile printing market, some users prefer an "open ink" option in which they can purchase and use certified inks from third parties, rather than having only one option: the vendor’s ink. It will be interesting to see how EFI develops a strategy to increase the use of its OEM inks.

The Matan acquisition is a good example of consolidation in the grand-format market. This exclusive market segment is one where EFI solutions, including hardware, as well as materials such as its UV SuperFlex inks, give it an edge over its competitors. Among the wide-format categories in the graphic arts markets, UV inkjet printing is seeing the highest growth, but it is being challenged by latex inkjet from competitors such as HP Scitex. As EFI’s solvent business declines, the Matan acquisition solidifies EFI’s position and expands its geographic, as well as its market footprint with an expanded customer base.

EFI 2014 revenue was $790 million. The industrial inkjet portion was about 48 percent or $379 million. EFI’s Fiery business accounted for $280 million and its productivity software business accounted for $130 million. EFI’s strategy to add supply-rich businesses to its portfolio will make the company quest to reach a billion dollar mark in the near future. The addition of Matan’s and Reggianni’s customers will also provide uplift for the Fiery and production software businesses as these tools are adapted to serve clients in these segments.

For the industry at large, these acquisitions represent two types of strategies. EFI’s investment in Reggiani supports the rapid migration of digital printing into textile manufacturing. In contrast, the investment in Matan represents consolidation in a mature market—in this case, sign and display wide-format where gaining share of users is critical for future success.

In both cases, it is clear that EFI bases its acquisitions on keen observance of industry trends. InfoTrends expects that these acquisitions will pay off for EFI and foster continued growth.