A Dow Jones news report said the ACS deal is expected to send Xerox’s service revenue skyrocketing from 2008’s $3.5 billion to an estimated $10 billion by 2010. The Connecticut-based Xerox has seen a steady decline in revenue from its copier and printer sales as well as from accompanying ink, toner, and paper, the news report said.
According to the Dow Jones report, Xerox’s deal values ACS shares at $63.11, a 34%-premium to Friday’s closing price and 55 cents below the stock’s record high set in February 2006. Holders would get $18.60 and 4.935 shares of Xerox for each ACS share while Xerox also will assume $2 billion of ACS debt and issue $300 million of convertible preferred stock.
ACS is also the parent company of Buck Consultants LLP.
“We know that for ACS to expand globally and differentiate our offerings through technology, we need a partner with tremendous brand strength and leading innovation. Xerox offers that and more to bring our business to the next level while strengthening theirs,” said ACS President and CEO Lynn Blodgett.
ACS’ Business Reach
A letter from Xerox CEO Ursula M. Burns released publicly Monday afternoon contained data about ACS to support her contention of its business reach.
“They are the largest provider of managed services to government entities in the United States and a major player in just
align=”left”>about every sector of business and industry, “she said in the letter, noting that business process outsourcing (BPO) is estimated to be a $150 billion market, growing at a rate of 5% year. “All market trends and emergingcustomer demands point to BPO as a highly attractive market for companies like ours.”
align=”left”>The Xerox exective pointed out about ACS that it handles:
- over 1 million credit card applications annually.
- $3 billion in electronic toll collections annually, including the popular E-Z Pass system in the U.S.
- insurance claims for 36 million people annually.
- $170 billion in student loans each year.
- 1 million phone calls a day to provide support in areas like H.R. administration and customer service.
The Xerox deal comes two years after an ultimately unsuccessful marriage between ACS and Cerberus Capital Management for a $6.2-billion offer. The deal eventually fell apart due to shareholder complaints about the size of the Cerebrus offer; Cerebrus eventually pulled the proposal because of credit market turmoil at that time (see Cerebrus Drops Bid for ACS ).
ACS has since grown into a 74,000-person company with a broad product pipeline that includes a wide variety of consulting offerings - particularly in the health insurance arena from which ACS gets about a quarter of its revenue, the news report said.
The Xerox 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. It will be led by Blodgett, who will report to Xerox CEO Ursula Burns.
More information regarding ACS is available at http://www.acs-inc.com .
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