Lexmark’s Share Price Ignores Letter of Appeal

Despite news of 13,000 Lexmark employees urging US President Obama to block the proposed acquisition of the publicly listed Lexmark International for $3.6 billion by a consortium of Chinese investors, shareholders have only continued to value the stock highly since the announcement on April 20.

Wirth Consulting claim to have received an unsigned copy of a letter on May 13, from a group called “Lexmark Employees for Ethical Conduct.” According to Wirth, “The group states that U.S. national security would be comprised if the acquisition—which must be approved by the Committee on Foreign Investment in the United Stated (CFIUS)—is approved, stating: ‘The overall risk to (U.S.) national security is real, immeasurable and unpreventable unless the sale of Lexmark to a Chinese firm is disallowed.’”

Apparently, the letter says that because Lexmark’s printers use smart, digital technologies, they are “vulnerable to hacking” and “being accessed by unauthorized users.”

The Lexmark employee coalition, as they are identified by Wirth, claim Lexmark printers are widely used by the U.S. armed forces and intelligence agencies, as well as in U.S. state and local governments. The letter allegedly states, in bold type, that “Allowing a communist country access to Lexmark hardware and firmware allows them direct access ‘behind the firewall’ to any of these offices.”

Jackson Wang, the chairman of Apex Technology, one of the Chinese companies involved in the buyout, told RT Media that Lexmark’s board remains strong on its approval for the transaction, even though it is still subject to shareholder and regulatory approval from agencies including the CFIUS.

Industry experts have advised RT Media there are mature, alternative measures that can be taken to eliminate any national security concerns. Previous cases such as the Lenovo – IBM acquisition reveal this.  RT Media has also been advised that CFIUS will examine all the details involved in the transaction and then make a decision after a comprehensive and prudent scrutiny. “During the process,” RT Media has been told, “the CFIUS may take the position that any parties involved in the transaction should execute a mitigation agreement or otherwise satisfy certain conditions in order to obtain CFIUS approval.”

Lexmark’s Chairman and CEO Paul Rooke said, “With the Consortium’s resources, we will be able to continue to invest in and grow the business to more fully penetrate the Asia Pacific market for hardware, software and managed print services.” He added Lexmark’s company headquarters would remain in Lexington, Kentucky, and that he would stay in his current role. Shares initially rose about 11 percent in trading after the announcement, and have continued to rise towards the $40.50 a share all-cash offer being made by the consortium.

The deal is expected to close in the second half of 2016.

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