Xerox had agreed to buy Affiliated Computer Services (ACS) for $6.4 billion the biggest acquisition in Xerox' history. It's a good move on the part of Xerox, further diversifying its printing and copying focused brand into computer services.
Its not like printing or copying will go away anytime soon, but that segment is in decline. The Xerox - ACS deal is a cash / stock transaction with the pricing of of 63.11 per share showing a 33 percent premium over Affiliated Computer Services' closing stock price on Friday.
Xerox shares fell 97 cents, or 10.7 percent, to $8, in pre-market trading. Meawnwhile, ACS shares jumped $9.10, or 19.3 percent, to $56.35.
In a statement, Xerox said the ACS acquisition will triple its services revenue to an estimated $10 billion next year. ACS is a $6.5 billion company which had fiscal '09 revenue growth of 6 percent and new business signings of $1 billion in annual recurring revenue.
The Xerox - ACS deal will give Affiliated Computer Services shareholders $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. Of course, that drop in Xerox shares this morning automatically lowered the purchase price, a sad testament to these combo deals.
The Xerox - ACS deal also requires Xerox to take on $2 billion of Affiliated Computer Services debt and issue $300 million of convertible preferred stock to ACS's Class B shareholders.
The Xerox - ACS deal is new CEO Ursula Burns’s first since taking over Xerox, the world’s largest maker of high-speed color printers, in July. The acquisition of Affiliated Computer Services is expected to compete in the first quarter of 2010.
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