Vistaprint Set to Acquire Italy's Pixartprinting - Analyst Blog

Vistaprint N.V. VPRT, a global online provider of professional marketing products, inked a definitive agreement to acquire Italian design firm Pixartprinting Srl. The acquisition involves a base purchase price of about €127 million. With the acquisition, Vistaprint will own a 97% stake in Pixartprinting, with the remainder being retained by the latter's founder.

The transaction is expected to conclude in the fourth quarter of fiscal 2014, subject to customary regulatory approvals.

The Acquiree

Pixartprinting is a leading European web-to-print company for professional customers, catering primarily to graphic arts professionals. Headquartered in Quarto D'Altino, the company generates revenues from graphic design agencies, print resellers and local printers, who in turn supply printed paraphernalia such as brochures, flyers, business cards, decorated apparel, textiles, banners, signs and labels to small and medium business enterprises.

The company's competency lies in remaining competitive through continuous innovation in cutting-edge technology, while providing its customers with the best service and a highly user-friendly technology platform.

In calendar year 2013, Pixartprinting recorded revenues of around €56 million, reflecting year-over-year growth rate of over 35%, while its EBITDA grew 43% year over year to €15 million. The enterprise value, comprising of base purchase price and net debt, represents a valuation multiple of 9.8x the EBITDA for calendar year 2013. Thus, with its strong revenue growth rates and attractive EBITDA margins, Pixartprinting represents an attractive business opportunity for Vistaprint.

Outlay and Accretion

The transaction will be funded in cash, utilizing Vistaprint's existing debt facility. The acquisition is expected to be accretive to revenues and operating cash flow for fiscal 2014. However, it will have a weakening effect on GAAP earnings per share EPS till fiscal 2015, owing to transaction costs and expected amortization expenses for the intangible assets connected to the acquisition. For non-GAAP EPS, the acquisition is expected to be neutral to earnings in fiscal 2014, but accretive to fiscal 2015 results.

Synergies

Pixartprinting has a market focus that is distinct from Vistaprint's brand, yet their core print faculties remain the same. Pixartprinting provides strong front-end customer service, and specializes in serving graphically-enabled customers by way of an upload and print business model. Vistaprint customers primarily rely on its graphic design templates; thus, this acquisition will enable it to extend its product portfolio.

Vistaprint plans to develop a customer base in the small business segment which has more sophisticated design and print needs, better served by an “upload and print” offering. Also, Vistaprint's expertise in technology and manufacturing can further augment Pixartprinting's success.

Going Forward

Vistaprint has recently completed its acquisition of People & Print Group, which has operations in the Netherlands and Belgium.

Both the acquiree firms have great depth and breadth in their product range, along with a high customer retention rate. These continuous European acquisitions will enable Vistaprint to achieve economies of scale and gain competitive advantages, thereby enhancing long-term shareholder value and improve its geographical footprint. Vistaprint thus looks set to increase market penetration in the fragmented small business printing market.

Vistaprint presently sports a Zacks Rank #3 (Hold). Other notable stocks in the industry worth mentioning include Adecco S.A. (AHEXY), Broadridge Financial Solutions, Inc. BR and Paychex, Inc. PAYX. All these stocks carry a Zacks Rank #2 (Buy).