IBM plans to eventually offload its enterprise printing systems division to Japanese printer and copier vendor Ricoh. The two companies announced Thursday that they're forming a joint venture company based on the IBM unit, which will gradually become a fully owned Ricoh subsidiary.
Initially, Ricoh will acquire 51% of the joint venture, which will be known as the InfoPrint Solutions. Over the next three years, the Japanese company will gradually acquire the other 49% of the printing business to eventually own the entire operation.
The first part of the deal, forming the joint venture, is due to be completed in the second quarter of this year, subject to regulatory conditions.
Ricoh will pay IBM $725 million (£368m) in cash both for the initial 51% of the joint venture and as a prepayment for the other 49%. The final consideration for the transaction will be determined once the three-year period ends based on the profits and losses IBM and Ricoh sustain in running the joint venture.
In 2006, IBM's printing business generated around $1 billion in revenue, according to the vendor. The division encompasses workgroup laser and multifunction printers, which feature scanning, copying and faxing capabilities as well as thermal industrial printers and continuous form production printers. IBM also offers some printers for small to midsize businesses (SMBs) under its Infoprint Express brand.
The transfer of the IBM Printing Systems Division to Ricoh will allow IBM to focus on its core businesses and clients, IBM chair Sam Palmisano said in a statement. He stressed the move is an extension of an existing 20-year relationship between IBM and Ricoh. The Japanese vendor has the necessary investment to grow the printing operation, according to Palmisano.
Over the last three years, it became more and more obvious to IBM that the vendor needed to do something about its printing business since the unit's growth was slowing down. For its part, Ricoh is looking to expand its printing business and make the InfoPrint Solutions into a core business.
IBM spun off its lower-end printing business in 1991 with the founding of Lexmark, which went on to become a separate publicly traded company in 1995.