Buy-out hint for Watson firm

Evan Johnson

A management buy-out is being considered by office equipment company Onesource despite plans to publicly list later this year being described as "almost certain" by co-owner Eric Watson just last month.

Onesource chief executive Evan Johnson said a listing "is absolutely where we are headed", but a management buy-out "is possible. It's something we have certainly not discounted.

"We haven't appointed a broker, we are still going through that process. The next logical step is to announce who we are working with and progress from there.

"When we get into this process, all those opportunities will come to the surface."

News that Hanover Investments-owned Onesource was in play came from Hanover shareholder Eric Watson on a flying visit from his new London base last month.

Ubix, which was this month renamed Konica Minolta Business Solutions New Zealand after a merger with the local arm of the copier giant, was one of Watson's earliest investments.

Ubix, which sold rebadged Konica machines, accounted for about two-thirds of Onesource's revenue (about $140 million) last year, Johnson said.

Telecommunications equipment supplier Cogent and Onesource Finance made up for the rest.

Incorporation of all Konica Minolta's New Zealand revenue will push this year's total to more than $150 million, but Johnson said the company was in a growth period.

"When we go to market at the end of the year, the existing owners and shareholders are leaving value on the table. It is not as if we are at peak and can't go any further forward," he said.

The idea behind Onesource was to turn Hanover's office equipment firms into an IT firm.

Johnson, who shifted over from rival Fuji Xerox a year ago, said it tried to do too much too soon.

"Our core competency is a best of breed copier company and telecommunications company in the small and medium business market. We are getting back to our knitting as a business."

During the year Onesource bought back its franchise operations, which accounted for about half its business.

Johnson said the merger with Konica Minolta, which left the Japanese company with 10 per cent of the Onesource subsidiary, was intended to guarantee supply and avoid a situation in which two parts of the same company would compete.

Konica and Minolta merged worldwide last year.

Onesource is largely an annuity business, with customers renting or leasing equipment. Almost half the revenue comes from service contracts.

"It is predictable and stable and we have an efficient selling engine, so even in a bad month it is hard not to make money," Johnson said.

"It is a classic New Zealand story where this company has come up with a service capability seen nowhere else in the world where we can talk to our equipment, it sends us information if it is about to break down and we can go in and fix it even before the customer knows something is going wrong."

Johnson said with its new generation of high-end Konica Minolta machines and its agency for Dutch firm Oce, Ubix was taking market share from Xerox in the production printing market - machines that print invoices, statements and direct mail.

"We would be number one for new devices going into that market."

Onesource options

* Last month Eric Watson flagged the likely float of office equipment company Onesource.

* The company is owned by the Watson/Mark Hotchin company Hanover Investments.

* Onesource chief executive Evan Johnson says that while a listing is still likely, a management buy-out is a possible option.