Xerox has announced today it will buy Affiliated Computer Services (ACS) in cash and stock in a deal that is worth US$6.4 billion, allowing the copier giant to expand into the outsourcing and IT services market as its corporate customers spend less.
Xerox’s CEO Ursula M. Burns, who became the chief executive of the company on July 1, said the deal was a “game-changer” for Xerox.
“By combining Xerox’s strengths in document technology with ACS’s expertise in managing and automating work processes, we’re creating a new class of solution provider,” she said.
“We’re proud of our significant profitable growth over the past 20 years and our ability to manage our clients’ operations with a global infrastructure and workforce,” President and CEO for ACS Lynn Blodgett said.
“We also know that for ACS to expand globally and differentiate our offerings through technology, we need a partner with tremendous brand strength and leading innovation. Xerox offers that and more to bring our business to the next level while strengthening theirs.”
It will pay US$63.11 per share of ACS, a 34 percent premium to its closing price of US$47.50, and holders of ACS’ stock will be getting $18.60 and 4.935 shares of Xerox. As part of the deal, it will assume the $2 billion debt that ACS accumulated before the sale.
However, there will be some cost cutting after the deal, with Xerox saying that will save $300 million to $400 million annually in the first three years once it acquires ACS. The cost reduction will be focused on running the company, procurement and using ACS’s expertise in back-office operations to handle some of Xerox’s internal functions.
The deal needs to be approved by the boards of Xerox and ACS, and a special committee at ACS; and is expected to close within the first quarter of 2010.