Cimpress acquires the National Pen Company and its extensive investment causes a major stir in the online print market…
The online print giant appears to mean business with regard to mass customization – Cimpress is investing around $218 million to acquire the promotional products specialist, National Pen Company. The world’s currently largest mass customization business is absorbing a company that successfully markets design-it-yourself writing implements in particular to more than a million customers (small and mid-sized enterprises). That means that an additional brand focusing on marketing materials is now set to join the Cimpress family alongside its custom print products specialists – the MCP network continues to grow.
Resourceful industry specialists already got wind of Cimpress’ interest in National Pen a few days ago. However this was not via the regular information channel, i.e. via a press release. Since all larger corporations have to undergo a merger review/control process in the event of an acquisition or merger, Cimpress’ takeover of the National Pen Company was already gazetted by the Federal Cartel Office back on November 28, 2016 in the latter’s Customized Print Products category. Cimpress intends to acquire full ownership of the company, which is going to cost Robert Keane and his corporation some $218 million (USD). And because it appears that some aspects of the acquisition are mere formalities, full-blown integration of the “newbie” into the Cimpress family by the end of Q1/2017 is realistic. Given National Pen’s annual revenues in excess of 200 million USD and its double-digit annual growth, Cimpress seems to have landed a real ‘catch’ by acquiring this specialist for customizable writing implements and many other marketing items besides – of course that’s factoring in the dimensions that Keane et al operate in.
I got the opportunity to have a brief chat with Cimpress CEO Robert Keane about this topic – and I don’t want to deprive any interested beyond-print reader of his responses to my questions:
Bernd Zipper: At first glance the decision to acquire the National Pen Company looks like the correct one, as it enables Cimpress to pursue its mass customization strategy further. But isn’t the “ballpoint pen” segment one in which Cimpress could perhaps buy in products via a fulfillment business?
Robert Keane: It’s true that we are actively increasing the number of third party fulfillers we work with, but that doesn’t mean we won’t also produce products ourselves when we can do so using operations where we have unique competitive capabilities.
This was one of the primary reasons we were interested in acquiring the company: National Pen has highly efficient production operations that are specialized to produce large numbers of small quantity orders that small business customers really value. Few companies even come close to NPC’s volume, quality, product breadth and depth, global reach and cost competitiveness for small orders of custom writing instruments.
Bernd Zipper: NPC has more of a “Web 1.0” image – its store is relatively basic, and the in-store customer journey really isn’t up-to-date. Is the National Pen Company ready for a merger with Cimpress MCP?
Robert Keane: Yes, we expect NPC will connect to our platform as a fulfiller in the relatively near future. NPC’s order processing and production IT systems manage and fulfill well over a million orders per year. It’s true that they do have a nascent e-commerce business and Cimpress has the expertise and skills to help develop it further. We see this as an area of future synergy and opportunity.
Bernd Zipper: I couldn’t find the order quantity of “1” – the customer must always order a minimum quantity of 50 or more. Is this really about mass customization?
Robert Keane: We don’t consider “quantity of one” to be a litmus test for mass customization. The quantity of 50 custom pens is actually low relative to the 500 or 1000 traditionally required for minimum orders in the market for custom pens. In fact, NPC may be one of the only companies that offers such a vast number of writing instrument products in such small quantities for such competitive prices. If we can produce just one unit of any given product economically, and if there is demand for order quantities that small, we will offer it. But many of our businesses have very strong product lines with minimum order quantities of 50 or 100 units or more, such as business cards, flyers and brochures.
“By purchasing NPC, the world’s biggest Mass Customization Supplier Cimpress is cleverly enlarging its existing product portfolio and also putting more focus on Marketing Materials in smaller quantities – in my opinion a very smart move.” – Bernd Zipper
Bernd Zipper: The National Pen Company seems to me to be more of a “traditional” business. How does that fit with Cimpress’ corporate culture?
Robert Keane: Culture and fit are things we look at very closely when making an acquisition. Like many of the other companies that have joined Cimpress, NPC shares our common passion for helping businesses make an impression and believes that mass customization can bring tremendous value to customers. NPC has also built a culture of operational excellence which we value greatly.
But I also disagree with the characterization that NPC is a traditional company. NPC and Cimpress share a lot of similarities: both companies combine analytically-driven direct marketing, high-volume service centers and deeply specialized mass customization production capabilities to deliver millions of small-volume orders of custom products that help small business owners grow their business in more than a dozen countries around the world. That has made both firms clear leaders in our respective markets.
Bernd Zipper: NPC’s majority shareholder is Lincolnshire Equity Fund – Cimpress is going to buy shares valued at 50 million for 84.22 $. What’s the story behind this offer, which is in addition to the purchase price?
Robert Keane: The $50M share repurchase at $84.22 is in this release so that our shareholders understand that in addition to the acquisition, we have also allocated a significant amount of capital to a Cimpress share repurchase. But this repurchase does not have anything to do with the agreement to purchase NPC. The financial details of the acquisition are that we expect to acquire 100% of the business from the existing owners of NPC for approximately $218 million (USD), with customary adjustments for net debt and working capital changes upon the close.
Bernd Zipper: To what extent will this acquisition have an impact on existing partnerships with fulfilment businesses that Cimpress already uses?
Robert Keane: Cimpress is a growing and important customer of many different third party fulfillment partners and we don’t expect this to change as a result of our relationship with National Pen. In fact, we believe that our acquisition of NPC will help us provide greater value to customers of many of our businesses which may translate into more opportunity for all of our partners.
My take: What is likely to interest Cimpress most about this acquisition is the core business of this producer of customizable ballpoints etc. The National Pen Corporation, based in San Diego/California, was established in 1966, has enormous proprietary production capacities and employs various application methods like laser engraving, pad printing (very precise indirect gravure printing), silkscreen printing and digital print methods for its wide range of marketing products. National Pen became known and achieved success by offering low order quantity options and comparatively low prices, which catered in particular to the demands of small businesses for affordable marketing materials. Vistaprint, as a major Cimpress brand, was and is not particularly successful at selling customizable ballpoints as marketing materials – according to customer opinions. That’s because the quality of its writing implements has very frequently been criticized as being unsatisfactory, a situation that this acquisition is designed to change in the future. Some 700 employees are responsible at National Pen for producing promotional items; production and sales centers in California, Tennessee, Germany (Berlin), France (Universal Pen), Ireland and Canada (Perfect Pen and Stationery) enable the company to serve customers in 29 countries, which include the major Asian markets of China and Japan. So this acquisition will have a major international impact on the mass customization market; Cimpress is not only enlarging its portfolio but is also purchasing strategically positioned production facilities (plus associated technology skills) and satisfied customers. But how did National Pen acquire such a large customer base? On the one hand they have competed in the market for many years and accordingly have gained plenty of experience. On the other hand the company’s direct-mail marketing and telemarketing service enables it to reach a broad yet at the same time high-potential (in transaction probability terms) mass of consumers. At any rate some seven million mailshots are sent out every year.