Canon expands into video surveillance with Axis deal

TOKYO: Canon Inc made a 23.6 billionkrona ($2.8 billion) cash bid to acquire Sweden’s Axis Communications AB, expanding into video surveillance as smartphone competition erodes digital camera sales.

The world’s largest camera maker offered 340 kronor per share, almost 50% more than the stock’s closing price on Monday in Stockholm, the companies said in statements.

Canon is making its largest ever acquisition as improved smartphones lure customers from cameras and the Japanese electronics company tries to diversify into products such as printers.

Revenue from camera sales has fallen in the last three fiscal years, while sales of office products including printers and peripherals have increased.

“This is a good move for Canon,” Kazuyoshi Saito, an analyst with Iwai Cosmo Securities Co, said by phone. “The deal enables the company to not only sell the cameras themselves, but also to have a larger networking service that it can design and operate.”

Axis makes video-surveillance equipment used in casinos and shopping malls.

The market for such recording equipment and related video encoders is expected to exceed $20 billion next year.

“The video surveillance system market has continued to realise rapid growth,” Canon said.

The company said the network surveillance camera business would be a “driving force for future growth within Canon Group.”

The offer price values Axis at 23 times estimated 2015 earnings, according to data compiled by Bloomberg.

That compares with China’s Hangzhou Hikvision Digital Technology Co and Canada’s Avigilon Corp, which are trading at 19 times and 24 times projected earnings, respectively, according to analyst estimates compiled Bloomberg.

Axis’s board has unanimously recommended shareholders to accept the bid. Its three largest shareholders — Christer Brandberg, Terese Karlsson and Martin Gren, who together hold 39.5% of the shares — have also agreed to sell.