Fuji Xerox set to acquire ASX-listed tech company CSG Limited for $150 million

Fuji Xerox has entered into an agreement with CSG to acquire all of its shares. Photo / Supplied

Fuji Xerox, recovering from a near $500 million accounting scandal involving its New Zealand and Australian subsidiaries, has launched a takeover for Australian tech company CSG Limited for A$140.8m ($150m).

The printing company, owned by Japan's FujiFilm and US-based Xerox, has entered into an agreement with CSG to acquire all of its shares, subject to shareholder approval.

Under the deal, CSG shareholders will receive A$0.31 cents per share. CSG's equity is valued at A$140.8m and enterprise value at A$181.6m ($194m). The transaction will be funded from Fuji Xerox Asia Pacific's existing cash on balance sheet.

CSG, which provides printing and IT services for nearly 10,000 companies, will continue to operate as an independent subsidiary. The company was previously known as OneSource and once owned by Eric Watson and Mark Hotchin's Hanover Group.

The acquisition is said to enable Fuji Xerox to diversify into technology services offered in both New Zealand and Australia, and expand out its business to service small and medium-sized firms.

CSG chairman Bernie Campbell said the Brisbane-based company was an ideal strategic fit for Fuji Xerox's global business.

"Our expertise in IT managed services and office solutions for the SME sector in Australia
and New Zealand [complements] Fuji Xerox's leading print and technology operations," Campbell said in a statement.

"Our more than 10,000 SME customers across Australia and New Zealand will benefit from our long-term integration with Fuji Xerox through increased scale, broader product and service capability."

CSG, founded in Darwin in 1988, employs 670 staff based in Australia. Fuji Xerox is one of the largest document and print management companies in the Asia-Pacific region.

CSG posted revenue sales of A$217.6m ($232m) in the year to June 2019.

Kouishi Tamai, Fuji Xerox president and representative director, said Fuji Xerox and CSG combined presented an "exciting opportunity" as it would enhance "the products and services available to help customers navigate their evolving technology needs".

CSG shareholders will vote on the takeover plans at a meeting scheduled for February. It will also need approval from an Australian court.

Fuji Xerox's false accounting came to light in 2017 after an independent investigation found the company had operated on a "sales first at any cost" culture, with staff awarded lavish bonuses, including luxury holidays.

The scandal resulted in lawsuits brought against the company and three executives including former managing directors Neil Whittaker and Gavin Pollard and former CFO Mark Allright.

Commenting on the CSG acquisition, Fuji Xerox New Zealand current managing director Peter Thomas said the internal changes the company had introduced in recent years had seen the company "return to doing the basics really well" and had translated into a return to profitability.

"This acquisition will materially expand and diversify our footprint across the industry in New Zealand. We're operating in a highly competitive industry and the two companies are naturally complementary in terms of the client segments we each service," Thomas said.

"Our strategy is about getting out in front of a maturing print services business and CSG's IT Services platform represents an opportunity to strengthen the value proposition we can bring to customers, who are looking to us to lead in bringing integrated and cost-efficient solutions."