Creo digs in for proxy fight – News commentary by Andy McCourt

Between them the Burton-Goodwood lobby control nearly six percent of Creo shares and can only succeed in ousting the founder directors by influencing more shareholders to vote no-confidence in CEO Amos Michelson and his board.

Burton’s CEO Robert Burton has put himself forward as a potential CEO of Creo. He is a veteran of the printing industry and is credited with turning around business forms firm Moore inside two years and returning it to profitability.

However, US analysts note that proxy fights rarely succeed. Creo has 21 days from the Burton-Goodwood’s filing to accept or reject, and then a long war of attrition could ensue. Locally, Creo Australia’s operations say it’s ‘business as usual.’

Other significant shareholders on the Creo register include Capital Research and Management with about eight per cent, and British Columbia’s public sector pension fund with over five per cent. Amos Michelson himself believes in his company as he is the Creo board’s largest shareholder with over two million shares held, or with options.

According to Canada’s Globe and Mail writer John Partridge, Michelson has indicated he will not step down and has already begun cost-cutting measures to return Creo to profit and maybe the halcyon days of 2000 when the shares hit USD$75 on the NASDAQ exchange. Yesterday they closed at $15.20, up 11.4% since the push to oust the board began last week.

Amos Michelson said the board and management "remain confident" in the company's "strategic direction" and recent cost-cutting initiatives. "Nevertheless," he said, they "are evaluating all alternatives for maximizing shareholder value."

These alternatives include both acquisition and disposal of assets, and strategic alliances. International investment bank Merrill Lynch has been engaged since August on the project in an advisory capacity to the board.

Creo has not made profit for four out of the past five years and surprised the plate consumable supply market last year by entering CTP plate manufacturing via acquisitions of plate manufacturers in South Africa and elsewhere.

According to Globe and Mail, there is also speculation about who might take over the company should the total sale option be advocated. Analyst Vigen Ghazarian at Sprott Securities said Eastman Kodak "would gain the most." This is obviously a reference to its 50% shareholding in Kodak-Polychrome Graphics, the world’s largest supplier of CTP plates.

Agfa and Heidelberg have also been mentioned as potential candidates by analysts should all or part of Creo be up for sale.

MY CALL

I first met Amos Michelson and Creo at Seybold 1994 when they launched their first (and visible light!) CTP machine with the help of financing from RR Donnelly who took the first few units. Later, Kodak injected funds and the duopoly of Creo and KPG thermal plates took the printing world by storm. Creo means ‘I believe’ and this sums up the attitude of Creo execs and employees. They are passionate about their technologies.

Let’s not forget that Creo includes Scitex and was once known as Creo-Scitex. My view is that these two companies have helped drag the global printing industry kicking and screaming into the IT era by making digital technologies available to all and sundry. It would be a shame if the pioneers were estranged from their good work. Scitex’s Efi Arazi went on to found EFI, another example of a forward-looking outfit bringing our industry enormous digital benefits through technological and culture change.

That the Burton-Goodwood putsch should happen shortly after the global syndication of ‘analytical’ reports about Creo in the trade media is a curious coincidence. [See Andy Tribute's commentary members.whattheythink.com/home/ge041019tribute.cfm and type CTP into Print21Online Search Archive for the ongoing debate – ed.]

That such close attention is being paid by very sharp analysts to a medium-sized Canadian tech stock is also interesting. It seemed to begin when Creo entered the plate supply market and flamed up when it announced a doubling of plate capacity only weeks ago.

Who stands to loose if Creo carves out a handy slice of the global $3 billion+ plate market? You know the answer to that one.

And maybe it’s in this direction we should look to see who might buy Creo should its shares be put up for sale, or should the Burton-Goodwood challenge succeed.

But the Creo ‘ceo’ is not selling and not stepping down and who can blame him? He’s young and his company files a patent just about every week. If the share price keeps heading North, as it has done in the past week, why be in a hurry?

When it comes to CTP Monopoly, Creo has got Mayfair and maybe Park Lane too.

Roll the dice……..