A Cambridge-based maker of barcode printers has agreed a £1bn takeover by Japanese multinational Brother.

Shares in the company, Domino, surged more than 30% after speculation that a rival bidder might emerge.

Domino makes printers to stamp barcodes and expiry dates on food items, drinks cans and medicines. It has moved into the hi-tech market of digital label printing, which has pitted it against much larger rivals such as Epson and Xerox. Printing of package labels is the fastest-growing part of the digital printing market.

Under the terms of the offer agreed by the boards of both companies, Domino shareholders will receive 915p a share in cash, a 27% premium to Tuesday’s closing share price of 721p. But on Wednesday the shares jumped to 946p on news of the offer as the market speculated on the possibility of an international bidding war led by US groups. Domino shares closed the day at 941p.

UBS analyst Robbie Capp said: “We believe Domino’s products have been leading the digital label printing market in certain areas, and wouldn’t be surprised if another party came in with a bid.”

The firm’s chairman, Peter Byrom, said Brother’s offer was “compelling and timely” as it would allow the company to rival competitors with significantly greater scale and financial firepower.

Domino, which was founded in 1978, has more than 2,300 staff across 16 countries and a distribution network covering 140 countries. It issued a profit warning last June, saying that its 2015 results would be hurt by pricing pressure in Asia and other developing markets as well as higher spending on research and development.

Byrom added: “It has become increasingly clear that maintaining its position in the enlarged markets will require Domino to find the appropriate partner that brings complementary skills and strengths in digital printing.”

Brother’s portfolio includes laser and inkjet printers, sewing machines, machine tools, industrial parts and online karaoke systems. Founded more than 100 years ago in Nagoya as a sewing machine company, Brother now has a market value of $4.5bn (£3bn) and employs 33,000 people globally. It came to the UK in 1968 when it bought the Jones Sewing Machine Company in Manchester. Brother sponsored Manchester City football club for a decade from 1989.

Investec analyst Michael Blogg noted that this was the first bid in the sector for some time, and a so-far-rare foray overseas by a Japanese company.

“While Brother’s deep pockets may be useful during another investment phase, this is essentially being driven by Domino’s move into digital printing, where other large corporations are active. We suspect the premium price is due more to Brother gaining ready-made strong positions in the lucrative coding and marking equipment and consumables market.”

He added: “It will be interesting to see whether the main competitors in coding and marking – Danaher or Dover – decide to counter the offer, but this is clearly being driven by the need to compete in the new for Domino field of digital printing, which is not its core business.”

Domino will operate as a standalone division after the two businesses merge, and its management will stay on. A spokesman said: “Brother intends to keep Domino’s organisation, including management, brand and culture.”

While job losses have not been ruled out, Brother has no plans to change Domino’s main locations and did not mention cost savings.

Barclays analyst Richard Paige said: “Domino Printing is the last independent in the product ID space, which is dominated by Dover, Danaher and Domino Printing, with a combined market share of about 85%.

“This may also stoke expectations of further M&A in the UK industrial space. Today’s recommended offer reminds us that companies with excellent long-term, focused market positions remain attractive to trade acquirers.”

Eleven years ago, Linx Printing – another Cambridge maker of high-speed printing equipment – became the target of a bidding war between US groups Illinois Tool Works and Danaher. It was eventually acquired by Danaher, a Washington-based industrial conglomerate, for £86m.

Brother’s president, Toshikazu Koike, said: “The addition of Domino fits with our strategic priority and enlarges our portfolio of industrial businesses … The combined global platform will help us accelerate both companies’ growth strategy.”

