DOES XEROX REALLY HAVE $ 6.4 BILLION TO SPARE ?

[Anonymous]

http://news.yahoo.com/s/nm/20090928/bs_nm/us_acs_xerox;_ylt=AvPKq_cz8tlvXG365ZGdePhH2ocA;_ylu=X3oDMTJmNmlrbmdpBGFzc2V0A25tLzIwMDkwOTI4L3VzX2Fjc194ZXJveARjcG9zAzUEcG9zAzUEc2VjA3luX3RvcF9zdG9yaWVzBHNsawN4ZXJveHRvYnV5YWY-
DOES XEROX REALLY HAVE $ 6.4 BILLION TO SPARE ?
Xerox to buy Affiliated Computer for $6.4 billion
NEW
YORK  – Xerox Corp  plans to buy Affiliated Computer Services Inc in a
$6.4 billion cash-and-stock deal that expands the copier company into
outsourcing and data center management.The deal, priced at a 33.6
percent premium to ACS’s Friday closing price, is the latest in the
active technology services sector. A week ago, Dell Inc said it would
buy Perot Systems Corp . Hewlett-Packard Co bought Electronic Data
Systems Corp in August 2008.

In its biggest acquisition ever,
Xerox will pay 4.935 Xerox shares and $18.60 in cash for each share of
ACS, totaling $63.11 per share based on Friday’s closing prices, the
companies said on Monday. That compares to ACS’s record high share
price of $63.66 in 2006.Shares of ACS, which competes with Accenture
Ltd  and Computer Sciences Corpin data center management, jumped 27
percent to $55.24 on the New York Stock Exchange. Xerox shares fell 14
percent to $7.74.The deal may help Xerox compete with printing rival
HP, which significantly expanded its services segment last year with
its $13.2 billion purchase of EDS.”HP strengthened their position in
terms of business services (in addition to) printing,” said Gabelli
& Co analyst Hendi Susanto. “Xerox may have to compete with HP, and
this will strengthen their position.”

Ursula Burns, chief
executive of Xerox, said revenue from services will triple to an
estimated $10 billion next year from $3.5 billion in 2008.”Customers
are saying, ‘We need help with the entire document infrastructure.’
We’ve got the technology piece of the back office and the technology
piece of automation. We need help with the information piece,” Burns
said in an interview.Xerox will assume ACS’s debt of $2 billion and
issue $300 million of convertible preferred stock to ACS’s founder
Darwin Deason. On an adjusted earnings basis, the deal is expected to
add to Xerox’s earnings in the first year.

The Norwalk,
Connecticut-based copier company has been focusing on its so-called
annuity business, in which customers consistently order supplies and
services for their printers.It derives some 70 percent of its cash flow
from the sale of supplies, financing and services to repeat customers.
But the economic downturn has forced some of its customers to slow
their plans to buy new equipment or order service.The companies expect
annualized cost savings of $300 million to $400 million in the first
three years after closing, which is expected in the first quarter of
2010. ACS CEO Lynn Blodgett said some jobs will be affected at the
Dallas-based company.

After the deal closes, ACS will operate as a standalone unit, run by Blodgett.
J.P.
Morgan and Blackstone Advisory Partners acted as financial advisors to
Xerox for the deal, Citigroup Global Markets Inc was financial advisor
to ACS and Evercore Partners was financial advisor to a special board
committee at ACS.

[Author]

September 29, 2009 at 11:25 AM