Xerox Announces $1.5 Billion Acquisition of Lexmark from Ninestar.

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Xerox Announces $1.5 Billion Acquisition of Lexmark from Ninestar.
Dec 23, 2024 — Xerox Holdings Corporation (NASDAQ: XRX) today announced that it has reached an agreement to acquire Lexmark International, Inc. from Ninestar Corporation, PAG Asia Capital, and Shanghai Shouda Investment Centre in a deal valued at $1.5 billion, including assumed liabilities. This acquisition will enhance Xerox’s core print portfolio and help expand its global presence in print and managed print services, positioning the company to better meet the evolving needs of clients in the hybrid workplace.

“Our acquisition of Lexmark combines two industry-leading companies with shared values, complementary strengths, and a commitment to advancing the print industry,” said Steve Bandrowczak, CEO of Xerox. “By integrating our capabilities, we will be in a stronger position to drive long-term, profitable growth and continue our Reinvention strategy, offering greater value to our clients.”

Headquartered in Lexington, Kentucky, Lexmark is a trusted partner to Xerox, known for its innovative imaging solutions, including a leading range of printers and multifunction devices. This acquisition will integrate Lexmark’s solutions with Xerox’s ConnectKey® technology and advanced Print and Digital Services, creating an expanded portfolio that enhances Xerox’s value proposition to both clients and partners.

The acquisition will also strengthen Xerox’s ability to serve the large, growing A4 color print market, expanding its distribution footprint, particularly in the APAC region. Following the transaction, the combined entity will serve over 200,000 clients across 170 countries, with 125 manufacturing and distribution facilities in 16 countries. Lexmark and Xerox together hold a top five global share in the entry, mid, and production print markets and are significant players in the managed print services sector.

“Lexmark has a proud legacy of delivering world-class technology, solutions, and services. We are excited to join forces with Xerox, leveraging shared talent and a broader portfolio of offerings to better serve our customers,” said Allen Waugerman, Lexmark’s president and CEO. “Together, Lexmark and Xerox will become an even stronger company.”

“Our shared values and vision will streamline operations, drive efficiencies, and make it easier for clients to work with Xerox,” Bandrowczak added.

Strategic and Financial Rationale
Strategic Fit: The merger of Xerox and Lexmark creates a vertically integrated company with complementary strengths in print equipment and managed print services (MPS), covering all geographies and client segments. The combination enhances both companies’ global reach and product offerings.

Growth Opportunities: Lexmark’s leadership in the growing A4 color print and supplies market, along with its potential to expand in the A3 equipment category, will be a valuable addition to Xerox’s portfolio. The combined companies will have an expanded product suite, increasing their ability to drive growth across equipment, MPS, and advanced digital services.

Financial Benefits: The transaction is expected to be immediately accretive to Xerox’s earnings per share and free cash flow. The acquisition will accelerate Xerox’s financial objectives, including revenue stabilization and double-digit adjusted operating income growth. Additionally, Xerox has identified over $200 million in cost synergies to be realized within two years post-close.

Improved Balance Sheet: The transaction will reduce Xerox’s gross debt leverage ratio from 6.0x as of Sept. 30, 2024, to approximately 5.4x before synergies, and to about 4.4x after the synergies are realized. With an improved free cash flow and a focus on debt reduction, Xerox plans to bring its gross debt leverage ratio below 3.0x in the medium term.

Transaction Details
Under the terms of the agreement, Xerox will acquire Lexmark for $1.5 billion, which includes net debt and other assumed liabilities. Xerox plans to finance the deal with a combination of cash on hand and committed debt financing.

In light of this financing, Xerox’s Board of Directors has approved a change in its dividend policy, reducing the annual dividend from $1 per share to 50 cents per share, effective for the first quarter of 2025. This adjustment will provide additional capacity to reduce debt while continuing to offer shareholders an above-market yield.

The transaction has been unanimously approved by Xerox’s Board of Directors and is subject to regulatory approvals, Ninestar’s shareholder approval, and other customary closing conditions. The deal is expected to close in the second half of 2025. Until then, Xerox and Lexmark will continue to operate independently.

Advisors
Jefferies LLC is serving as the financial advisor to Xerox, with Citi also providing financial advice. Ropes & Gray LLP and Willkie Farr & Gallagher LLP are Xerox’s legal advisors. Morgan Stanley & Co. LLC is the financial advisor to Lexmark, and Strait Capital Management is the financial advisor to Ninestar Corporation. Dechert LLP is acting as legal advisor to Lexmark, Ninestar Corporation, PAG Asia Capital, and Shanghai Shouda Investment Centre, while King & Wood Mallesons serves as PRC counsel to Ninestar Corporation.

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December 23, 2024 at 1:51 PM