Xerox to buy firm for $6.4 bn

Purchase of Affiliated Computer Services to help Xerox triple sales from services

Xerox Corp agreed to buy Affiliated Computer Services Inc for $6.4 billion in its biggest purchase, shifting to computer services as sales of its traditional printing equipment decline.

The transaction will help triple sales from services to about $10 billion, Xerox said today in a statement. The total price of the cash-and-stock deal is about 34 per cent more than Dallas-based Affiliated Computer’s closing price September 25.

The acquisition is Chief Executive Officer Ursula Burns’s first since taking over the world’s largest maker of high-speed colour printers in July. The transaction helps her expand into a market the company values at about $150 billion and gives her a foothold in managing administrative operations for multiple arms of the US government.

“With this combination, our tool box just got a lot bigger,” Affiliated Computer CEO Lynn Blodgett said in an interview. Blodgett will run the business as a unit of Xerox and report to Burns, 51.

Almost 90 per cent of Affiliated Computer’s new business contracts last year came from outsourcing, or managing operations for other companies. Total sales rose 5.9 per cent to $6.5 billion in the year ending June 30.

Xerox has posted sales declines for three straight quarters, with analysts projecting a fourth, according to the average of estimates compiled by Bloomberg.

Affiliated Computer closed at $47.25 on the New York Stock Exchange September 25. Norwalk, Connecticut-based Xerox declined as much as 8.8 per cent to $8.23 in early trading today after closing at $9.02. The stock had climbed 13 per cent this year before today, compared with a 43 per cent gain for the Standard & Poor’s 500 Information Technology Index.

Xerox will pay $18.60 a share in cash and 4.935 Xerox shares for every Affiliated Computer share, amounting to about $63.11, based on closing prices as of September 25. Xerox also will assume about $2 billion in Affiliated Computer’s debt.

Earlier this month Xerox said it would begin selling digital printers for packaging and labels, aiming to tap a new market. Xerox had $1.22 billion in cash and cash equivalents at the end of last quarter, with about $6.7 billion in long-term debt.

JPMorgan Chase & Co and Blackstone Advisory Partners advised Xerox on the deal. Citigroup Inc assisted Affiliated Computer.