Fujifilm’s takeover of Avecia’s business in inkjet inks at the end of last year demonstrates how rapidly the structure of key parts of the digital printing sector is moving towards a vertically integrated structure.
The Japanese company made its first major move into printing inks a year ago when it acquired Sericol, one of the biggest global producers of screen printing inks. The UK company is also a manufacturer of inkjet inks and a distributor of inkjet printing presses.
Now with its purchase of Avecia’s inkjet operation as well as an electrophotographic activity, both also located in the UK, Fujifilm is acquiring the world’s leading producer of dye-based inkjet inks.
The takeover brings Avecia into a worldwide operation which has been diversifying away from traditional celluloid film photography into the manufacture of hardware, printing equipment and accessories for digital imaging.
The New World Of Digital Business
Like rivals such as Kodak and Agfa, Fujifilm is aiming to become a top-ranking vertically-integrated player in the global digital imaging business with capabilities stretching from the manufacture of inks through to the production and marketing of finished consumer products.
The move confirms predictions that digital printing, particularly the making of its inks, will have a structure radically different from that of conventional printing.
It generates doubts about the long-term future of niche producers of ink ingredients and formulations in digital printing in the home and office sector and some commercial segments. Instead it reinforces expectation that large sections of the market will be dominated by large integrated OEMs.
Although Avecia has been a pioneer in inkjet inks, it has perhaps been too small to survive as an independent entity in the fast expanding area of digital printing. There had been rumors for some time that its inks business would be sold after Avecia’s private equity owners started to break up the company.
Fujifilm was among a number of companies which entered an auction for the inkjet and electrophotographic operation, after it was put up for sale by Investcorp and Cinven, Avecia’s joint owners, towards the end of last year.
The business was one of the last operations left at Avecia, which traces its roots to a group of the speciality chemical activities spun off in the early 1990s by the large UK chemicals producer ICI. Over the last few years, Investcorp and Cinvin have disposed of Avecia’s businesses in coating and inks resins, polymeric dispersions, biocides and polymer electronics.
Fujifilm is paying £150 million ($264 million) for the inkjet and the electrophotographic activity, almost 2.5 times the level of its two sales, the vast majority of which are in inkjet inks. The high price is seen as evidence of intense competition for ownership of the business among rival bidders.
The acquisition includes Avecia’s dye-making facilities at Grangemouth, Scotland, an ink formulation plant at New Castle, DE and an R&D unit at Blakeley, Manchester, England. All 340 employees are being transferred to Fujifilm to form a stand-alone operation.
“This business was at the forefront of the development of inkjet inks since its days with ICI in the 1980s,” explained an Avecia official. “It is still at the leading edge of technologies for dye-based inks, which is a position built on the long history of dye making at ICI. The site at Grangemouth has been manufacturing dyes for more than 100 years. There is a lot of heritage and expertise in organic chemistry attached to this operation.”
Avecia is particularly well placed in the fast-growing sector for inks for printing of digital photos, where it is estimated to have a market share of as much as 40 percent.
“Inkjet inks based on dyes, as opposed to pigments, are particularly suitable to photo-realistic digital printing because dyes have a much wider color gamut than pigments,” said an executive at one digital printing company. “As a result, they are able to provide a visual quality similar to that of silver halide photography.”
Fujifilm has in fact been one of Avecia’s OEM customers, the biggest of which are thought to be Epson, Canon and Hewlett Packard.
In Avecia’s electrophotographic activity, the attraction for the Japanese company is a technology for chemically produced toners (CPTs) for laser printers and photocopiers, which has not yet been fully commercialized. Fujifilm has a laser printer business, in which it has recently introduced a CPT technology developed jointly with Xerox.
Conventional toners are made from a process in which binder resin is melted and mixed with colorants and additives and then ground into small particles. Chemical toner manufacture gives much more control over the size and distribution of particles.
“CPT technology is providing the next generation of toners which have much smaller particles and hence higher resolutions and lower production costs,” said the Avecia official.
Image Polymers, Grangemouth, a 50/50 joint venture between Avecia and Mitsui Chemicals of Japan which makes toners with the traditional process at plants in the UK and the U.S., is not included in the deal.
Through ownership of Avecia and Sericol, now renamed Fujifilm Sericol, Fujifilm has created a strong foundation for expanding its inkjet operations in both Europe and the US.
When Sericol was acquired last year for £123 million ($230 million) from Saratoga Partners, a New York private equity firm, it had annual sales of approximately £150 million ($275 million), mostly in screenprinting inks.
Since then it has become a bigger player in the inkjet market not only in inks but also in inkjet printers through its role as global distributor of the products of Inca Digital Printers, Cambridge, England.
The presses of Inca, which is a pioneer in the development of wide-format flatbed equipment, are marketed with Fujifilm Sericol’s UV inkjet inks. The printers are promoted as being complementary to screen printing for work requiring high-resolution, detailed graphics and efficient turnarounds.
Fujifilm Sericol last year opened a £200,000 unit at its headquarters in southeast England to demonstrate an Inca Spyder flatbed digital press which can print on formats as large as 3.2 x 1.8 meters.
Despite Inca’s takeover in June last year by Dainippon Screen of Japan, which makes equipment for the semi-conductor and flat-panel display industries, the distribution deal with Fujifilm Sericol has been kept intact.
“Fujifilm Sericol continues to grow its digital business with the support and assistance of Fujifilm,” said Michael Bush, exhibitions and PR coordinator at Fujifilm Sericol. “We have access to Fujifilm’s extensive R&D facilities in Japan and many projects for new inkjet products and technologies are underway in both Japan and the UK. In addition, Fujifilm is supporting Sericol’s investment in resources in the growth of its digital business in terms of people and other resources on a worldwide basis.”
For Fujifilm, the takeover of Avecia has been spurred by its desire to become more competitive in the photo-realistic digital printing sector. A senior UK Fujifilm executive noted that the acquisition had been “driven by the photo side of the business.”
The Japanese company is pursuing a strategy of meeting a wide range of needs in the “capture-store-print-share” chain of the digital photography sector. It has been broadening out beyond the manufacture of digital cameras into digital imaging printing services, in which its promotional slogan is the “Proof is in Our Print” in terms of sharpness, detail and color resolution.
It is stepping up the installation across the world at the retail level of its networks of digital minilabs. In the U.S. last year, it introduced GetPix Photo Centers for outlets beyond the traditional photographic retailer. It also did a deal with Cingular, the largest cellular phone operator in the country, under which users of the new generation of camera-phones can send pictures directly from their handsets to one of 3,500 local photo developing units for prints to be provided within an hour.
Fujifilm is reported to be aiming to more than double the sales of Avecia’s inks by 2010, both by boosting shipments to existing third-party customers and through the widening of its own printing operations.
The company also sees synergies between Avecia’s technologies and Fujifilm’s activities in other sectors like flat-panel displays, for which it makes cellulose triacetate protective film for LCDs. It also makes a film that widens the viewing angles of LCD panels, as well as color resists for the displays.
However, Avecia’s capability of providing an opening into inkjet inks beyond the home, office and photo kiosk segments could be restricted by its limited involvement in the industrial inkjet sector. Here most inkjet inks are based on pigments rather than dyes which is Avecia’s specialty. The UK company divested its pigment manufacturing activities a few years ago.
“The future of colorants in inkjet inks lies with pigments,” said Steve Temple, technical manager at Xaar, a inkjet printhead developer and manufacturer at Cambridge, England. “Not only are the large majority of inkjet inks in the industrial market pigmented, but pigment-based inks are beginning to catch up with dye-based inks in the home-and-office sector. One of the long-term problems with paper printed with dye inks is that they can be difficult to recycle.”
Analysts have been speculating that Fujifilm will soon enter the industrial inkjet sector in a big way by taking over an inkjet printer manufacturer. It would then probably want to ensure that it would be backward integrated into the full-scale production of pigmented inkjet inks.
Fujifilm is making big strides towards its objective of being a leader in digital imaging in all major sectors. The production of digital ink ingredients and formulations will have a key role but it will be one among a myriad of different operations.