Creo Reviews Strategic Alternatives

By: E&P Staff Creo Inc., of Vancouver, B.C., announced that in July its board of directors formed a committee of independent directors to "review strategic alternatives" for enhancing shareholder value. Merrill Lynch was retained to assist in the review.

The committee, management, and advisors are to evaluate Creo's business plan and consider strategic options, which include acquisitions, alliances, resale arrangements, business combinations, and the sale of all or some company assets.

That review notwithstanding, Creo CEO Amos Michelson said in a statement that Creo's "board and the management remain confident that given the strategic direction we have established and the initiatives we announced on October 6, we will provide increasing earnings."

Those initiatives -- undertaken to streamline Creo operations, strengthen its "competitive cost position and provide a strong platform for earnings growth," according to a statement -- were to result in elimination of more than 200 positions worldwide, or 5% of the workforce (including 60 positions announced in August).

Creo said the program "will reduce expenses by an annualized rate of approximately [US]$24 million by the start of the fiscal third quarter of 2005 and is expected to reduce operating expenses and cost of goods sold equally."

At the time, Michelson said Creo had become the fourth-largest digital-plate vendor but had not generated the forecast bottom-line performance. "In fiscal 2005," he said, "we expect to continue similar top line growth while again increasing consumables revenue by more than 50%. More importantly, we are committed to do what is necessary to deliver on the bottom line." The initiatives were expected to allow pre-tax quarterly earnings of at least 8% of revenue by the fiscal fourth quarter of 2005.

The company said it cannot assure that its review "will result in any change in its business strategy or in the consummation of any agreement or transaction." Michelson said "any action pursued by the company will be in the best interests of all shareholders."