Ink jet and investors 3rd CIR High Value Manufacture Conference 12 November 2004 Dr Justin Hayward Managing Director Cambridge Investment Research Independent equity research, diligence and consulting for the DEPICT sectors www.cambridgeinvestmentresearch.com

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CIR Ltd: summary •

Independent Equity research

– Reports, company tracking for markets – Value to companies from dialogue & independence

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Market Research

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Due Diligence ~20 Associates

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Global conferences

“Global Industrial Ink Jet Printing” Report October 2004

– Specific expertise for client – Local or outsourced work

– Deep sector experience – Dynamic team formation – Adhoc projects – More HVM in UK and EUR – Other events 2005

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Ink jet: attitudes of investors • Industrial IJ hardware manufacture small market, public company shares of “small cap” fairly illiquid: – “Single analyst, part time” in research at i-banks – Institutional investor appetite low or simply unaware • They are generalists seeking maximum return

• Opportunity costs seen high for brokers – Only a few brokers cover it – London brokers do not cover foreign players – Desktop sector sees much more interest • Large, global, public, multinationals

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Appeal of ink jet • Markets now open • Traction in digital • But variable fortunes even among the biggest… • Cynical City • Interest from VC and private equity as well as corporate finance/structuring Charts source: Reuters (12 months historical time-series)

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CONTROL PANEL FOR NEW ELECTRONICS Tokki Bose

Inca Spectra

ULVAC DuPont Teijin Uniax Sarnoff

Xerox

Toshiba

Litrex

E-Ink

eMagin AU Opto Idemitsu

Samsung

Teco

Pioneer Hitachi HT

TDK

Denso

STM LG - Philips

Opsys

Delta

Optigraphics Selete

RITEK Nippon Seiki

Sharp Compaq

OTB

Visonox

Infineon

MAN Roland

Matsushita Toyo Ink

Coatue (AMD)

Johnson Matthey

Cabot SMP

TNO

Fuji Optrex

Microfab FlexICs

Eastgate Innoled Degussa

DPI

Olivetti

Hoya

Sanyo

Osram

PolyIC

Mitsubishi

Allied Materials

Alien

Kovio

Ormecon

CDT

Toppan

Eastman Dai Nippon Kodak (Sun Jet)

Toray

SeikoEpson

Bayer

Agfa

Motorola

Plastic Logic

Avecia Covion

USDC

Dow

MicroEmissive

Sumitomo

Xaar Siemens Lucent/Bell Air products Xennia Opticom Fraunhofers Merck IBM

Pelikon

New System

Canon

Rohm

ZBDisplays

Promerus

Sony

Gyricon

Applied Films

Berliner Glas

Panasonic

Flint Ink

Chungwa Picture Tubes

Precisia

Key: Asia Americas Europe Products Distribution Licences Investment JV or other

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Chart 1: Leading player map

Market sizes 2500 2000

16000 2003 sales (USD$mn)

14000

2003 staff

12000 10000

1500

8000 1000

6000 4000

500

2000 0

0 coding & marking

graphics and decoration

Source: CIR Ltd

total

coding & marking

graphics and decoration

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total

Market structure Coding and marking (22 firms)

private

Graphic Communications (29)

public

public

subsid/

subsid/

unit

private

unit

public independents

By Number of firms

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Market structure Coding and marking (22 firms)

Graphic Communications (29) public

private

subsid/ public

private

subsid/

unit

unit

public independents

By Value of firms’ sales

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Recent Deals • • • •

Danaher: VideoJet & Willett Danaher (VideoJet) - Linx Agfa – dotrix, Agfa -Thieme, Agfa-Xaar Other joint ventures and investments in technology development – E.g. EPSRC

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Recent Deals • VideoJet – Willett by Danaher – 1st and 4th/5th companies in the market, deals worth $400mn and $100mn – Why? – Fit good: US, high quality vs niche markets lower quality – Manufacturing consolidated from 11 to 6 sites (removed from UK to US and China) – “DBS” applied to new companies – Among other aggressive Product ID buys

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Recent Deals •

ITW bid to management for Linx then Danaher direct to shareholders

•

LONDON, Oct 6 2004 (Reuters) - U.S. diversified manufacturer Danaher Corp. DHR.N made a bid to buy Linx Printing Technologies Plc for 85.7 million pounds ($152.8 million), trumping a rival bid for Linx. Danaher offered 550 pence in cash for each Linx share. Linx had been subject to a 470 pence cash offer from Illinois Tools Works Inc ITW.N on Tuesday, sending Linx stock up 46 percent.

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– October 7 pm: Linx rejects ITW bid; ITW drops bid saying price fair value – Danaher only player left bidding for Linx, share price had been up to 586p – Linx valued at almost £90mn, compared to £50mn two days prior!

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Recent Deals • Agfa Gevaert buys dotrix; JDA with Thieme, and invests in Xaar technology • “Long term strategic” – Move to digital from traditional flexo- and screenprinting

• Become “integrator” – Enter industrial & packaging markets, access traditional screenprinting customers and knowhow

• High end and low end printers • Access to knowhow in digital printing

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Summary • Industrial IJ printing business looked at by mid-sized banks, VC, corporate finance, and private equity: – Coding & marking maturity accelerating now – Change expected in graphics – Bigger players in acquisition phase causing ‘flurry of interest’ from City in markets (‘consolidation plays’), which may reduce again after ‘obvious’ trades done

• Value chain partnership and M&A positioning key • The market size has gone through $2.3bn in 2003 • “Promise” in wide range of industrial deposition markets

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Thank you Dr Justin Hayward Managing Director, Cambridge Investment Research 44 1223 303500 direct www.cambridgeinvestmentresearch.com

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