Xerox copies tech firm trend
$6.4b purchase expands services
NEW YORK - Xerox Corp. said yesterday it will buy Affiliated Computer Services Inc. for about $6.4 billion in cash and stock, joining the expensive race among technology companies to broaden their offerings.
Xerox said the deal will create a $22 billion business that combines Xerox’s copiers, printers, and document management services with the “business process outsourcing’’ of Dallas-based ACS. Outsourcers like ACS take on tasks for other companies, such as helping to manage payroll or run health care plans.
Xerox’s offer amounted to a 33 percent premium over ACS’s closing stock price on Friday, although the value fell as Xerox shares lost $1.29, or 14.4 percent, to close at $7.68 yesterday. ACS shares jumped $6.61, or 14 percent, to $53.84, hitting a 52-week high of $55.84 earlier in the session. With the drop in Xerox’s share price, the deal was worth roughly $5.7 billion.
The move takes Xerox deeper into the back-office operations of its customers with the kind of acquisition that is popping up more and more as technology companies add a greater variety of equipment and services. Last week Dell Inc. said it would buy Perot Systems Corp. for $3.9 billion, kick-starting an information-technology services business. That comes a year after rival Hewlett-Packard Co. expanded its services business with the $13.9 billion buyout of Electronic Data Systems Corp.
Part of the logic behind such deals is to acquire companies that have tighter relationships with their customers because they provide more critical services, said Craig Le Clair, an analyst with Forrester Research. Businesses have more at stake outsourcing their payroll or accounting systems than buying copiers or personal computers. And companies that provide those services end up with steady revenue streams from multiyear contracts.
“Great move by Xerox,’’ Le Clair said. “It’s a very storied company, but one aspect of that story is they haven’t moved into new markets quickly enough. And this is exactly the kind of thinking and bold move that will move them into the next phase of growth.’’
Investors who knocked down Xerox’s stock yesterday were taking a different view.
Keith Bachman, an analyst with BMO Capital Markets, praised Xerox for trying to diversify but was not sure how likely it will be that Xerox or ACS can sell more products and services to each other’s customers.
ACS, a $6.5 billion company with about 74,000 employees and profit of $350 million in its last fiscal year, offers a range of services, such as helping companies manage health care plans and accounting. It has customers in government, transportation, health care, and retail.