Canon offers $US2.8bn for Axis in video surveillance move

In further evidence of Canon’s commitment to the CCTV, security and video surveillance industry, the company is making a bid to purchase Axis AB, the iconic manufacturer of IP video cameras, in a deal worth $US2.8bn.

Canon is offering shareholders 340 Swedish crowns per share, which is approximately 50% higher than the closing price of the shares on Monday night of 226.90 crowns.

There are 69.46m issued shares of Axis AB. Martin Gren, a co-founder and member of the board of directors of the company, owns 10.3% of them. Another board member with a substantial holding is Gustaf Brandberg who owns 14.5% of the shares. A further 14.4% are owned by Terese Karlsson. The shares are listed on Nasdaq Stockholm.

The three largest shareholders have recommended the offer to the rest of the shareholders subject to certain conditions.


Analysis: Jon Cropley, Principal Analyst at IHS

IHS estimates that Axis Communications was the third largest supplier of video surveillance equipment in 2014 with over 5% of a global market worth around $15 billion. Despite this, the company has faced intense competition, particularly from Chinese rivals in recent years. The largest of these, Hikvision and Dahua, have both been gaining market share faster than Axis. At the same time, the average selling price of a network camera has more than halved between 2010 and 2014.

Canon’s acquisition of Axis is the latest in a number of major changes to the structure of the supply chain for video surveillance equipment. It comes just two months after Samsung Group sold Samsung Techwin. Today, the supply chain remains highly fragmented. The top fifteen suppliers account for less than 50% of revenues and there are thousands of small suppliers. Consolidation has been anticipated for some time and Canon’s purchase of Axis could be just the start of a series of industry acquisitions in 2015.

Analysis: How far will Canon go in integrating with Milestone and Axis?

The news that Canon is seeking to acquire Axis Communications comes as no surprise to some security industry watchers who have been predicting such a move ever since Canon acquired Milestone last year.

Rumours swirled at Intersec in Dubai where industry insiders were speculating when and how it would happen, according to Eric Fullerton, formerly Chief Sales and Marketing Officer at Milestone and now CEO at Vicon Industries.

Fullerton told SecurityNewsDesk that the acquisition was a natural move for Canon because of the commonality and overlap in the market structure and the strong historical cooperation between Milestone and Axis.

Canon has in the space of less than a year gone from operating one security business to having three, each of which is a major innovator and brand in its own right. The question for Canon now is how far it will go toward integrating these three companies into one.

“In my opinion, Canon will need to move swiftly in driving stronger and faster integration between the three organizations and will also need to perform an effective repositioning of their solutions in the market,” he said.

However, Canon has stated that Axis Communications will continue to be run as an independent business, retaining its brand, separate legal entity, staff and offices.

In the view of this publication, this is the same sentiment it expressed about Milestone but, notably, since that acquisition, a number of senior members of staff have left the organisation. Whether those losses represent a significant disruption or just a bit of clear-air turbulence remains to be seen.

The question remains, to what extent does it make sense for Canon to operate three separate companies in the same market space? But on the other hand, how can it leverage the value of the three brands if it merges them into one organisation?

As Fullerton said, “We will just have to wait and see what they do!”


The offer for Axis by Canon follows the company’s purchase of Milestone Systems in mid-2014. Acquisition of Milestone by Canon sends shockwaves through surveillance industry

In a statement, Canon’s Chairman Fujio Mitarai said: “In recent years, the video surveillance system market has continued to realize rapid growth. Canon views its network surveillance camera business as a promising new business area and positions the business as a driving force for future growth within the Canon Group. Canon would be pleased to welcome Axis, the global leader in the network video solutions industry, into the Canon Group.”

After completion of the offer, Canon foresees the following advantages to the acquisition:

  • Strong technology synergies – the combination of its optical and imaging technologies with Axis’s network image processing technology plus Canon’s R&D resources will boost Axis’s competitiveness in the CCTV surveillance market.
  • Intellectual property – Canon and Axis each own intellectual property in different technology fields. Combined, it will allow the introduction of innovative solutions and services to the CCTV and security market.
  • Distribution and service network – Axis has a worldwide network of 75,000 business partners including system integrators which Canon will be able to add to its distribution and service network for its CCTV camera products and business equipment.

Canon said that following the completion of the deal, it will retain Axis’s current management team together with its offices, development centres and sales offices. It will also retain the Axis brand and operate as a separate legal entity within the Canon Group.

Reaction from the security industry has been mixed.

Brian Song, Managing Director at IDIS Europe, sees it as a positive move. “This and other recent M&A activity demonstrates current confidence and growth in the industry. A move by such a significant global player to increase their presence in the IP space only reinforces the increasing importance of network surveillance. The importance of IP to this market is something IDIS committed to early on, which has allowed us to assume a leadership position in terms of performance, quality and total cost of ownership. IDIS is always pleased to see greater recognition of the value of IP solutions in our market space,” he said.

Ollencio D’Souza, Managing Director at TechnologyCare, commented on LinkedIn: “It shows that Canon are very keen on the physical Security Industry and because they see the application of IP Video growing in many vertical segments, Like all the big guns – Tyco, UTC (Interlogix, Lenel), Honeywell, etc that have their own consolidated product range – Canon could become a very independent supplier to the vertical markets they already are active in with their imaging products.

“The last point is that many manufacturers like Axis were too thin on the ground relying on the support of ‘integrators’ via distributors to reach new markets which really did not occur fast enough. Canon may deliver a wider customer base (with modified product lines using the core Axis IP technology). It is very good news that an outsider has ‘jumped in’ – there will be many more opportunities for the video (IP) technology and applications industry to grow especially with the likelihood of ‘access control’ becoming just another IP device on the network like IP cameras,” Ollencio D’Souza said.

Another reader on LinkedIn simply said: “Where’s the Don’t Like button?”

Estimated launch date for the offer is early March 2015, or as soon as the offer document can be approved by the Swedish Financial Supervisory Authority and Nasdaq Stockholm.

Links
Canon statement
Axis statement

 

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