Xerox receives regulatory approval to acquire Affiliated Computer Services (ACS)

Xerox Corporation has announced that the Hart-Scott-Rodino review period for its acquisition of Affiliated Computer Services, Inc. ( ACS | Quote | Chart | News | PowerRating) has expired. Both the companies are based in the US.

ACS is a provider of business process outsourcing services, while Xerox is a supplier of photocopiers, printers, and other document systems.

Announcement (September 27, 2009):

Xerox has entered into a definitive agreement to acquire ACS in a cash and stock transaction valued at $6,400 million or $63.11 a share.

Under the terms of the agreement, ACS shareholders will receive a total of $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. In addition, Xerox will assume ACS's debt of $2,000 million and issue $300 million of convertible preferred stock to ACS's Class B shareholder.

The transaction, which has been approved by the Xerox and ACS boards of directors and ACS special committee, is expected to close in the first quarter of 2010. ACS will operate as an independent organization and initially will be branded ACS, a Xerox Company.

Simpson Thacher & Bartlett LLP is acting as legal counsel, and J.P. Morgan and Blackstone Advisory Partners are acting as financial advisors to Xerox on this transaction. Cravath, Swaine & Moore LLP is serving as legal counsel and Citigroup Global Markets, Inc. is serving as financial advisor to ACS. Ropes & Gray LLP is acting as legal advisor and Evercore Partners, Inc. is acting as financial advisor to the special committee of the board of directors of ACS.

Deal Value (US$ Million) 8700
Deal Type                Acquisition
Sub-Category             Majority Acquisition
Deal Status              Announced: 2009-09-27

Deal Participants

Target (Company)   Affiliated Computer Services, Inc.
Acquirer (Company) Xerox Corporation

Deal Rationale

This acquisition will significantly strengthen Xerox in the document and business process management space, and will accelerate its growth in an expanding market. The transaction will boost Xerox's recurring revenue stream and revenue from services is expected to triple from $3,500 million in 2008 to an estimated $10,000 million next year.

Xerox also expects to achieve significant incremental revenue growth by leveraging Xerox's strong global brand and established client relationships to scale ACS's business in Europe, Asia and South America. In addition, Xerox will integrate its intellectual property with ACS's services to create new solutions for end-to-end support of customers' work processes.

Further, Xerox expects to achieve annualized cost synergies that will increase to the range of $300 million to $400 million in the first three years following the close of the transaction. The synergies are primarily based on expense reductions related to public company costs, procurement and using ACS's expertise in back-office operations to handle some of Xerox's internal functions.

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