Xerox, ACS Sees $95 Million Pretax Synergies In First Year Of Deal
September 28 2009 - 9:38AM
Dow Jones News
Xerox Inc. (XRX) expects its $6.4 billion acquisition of
Affiliated Computer Services Inc. (ACS) to yield more than $95
million in pretax cost savings in the first year the companies are
combined.
The deal, expected to have $300 million to $400 million in such
savings in the first three years, will yield cross-selling
opportunities and international expansion for the combined
businesses, executives from both companies said in a conference
call Monday.
"The lines between business process and document management are
blurring," Ursula Burns, who became Xerox's chief executive July 1,
said.
The deal comes as Xerox shifts its business model to concentrate
more on services revenue, which will now rise to $10 billion in
2009 from just $3.5 billion last year, when Xerox had total revenue
of $17.6 billion.
The companies expect the deal to have "upside revenue synergy
potential" that is "significantly higher" than the cost
savings.
The savings in the first three years will include $50 million to
$75 million in total restructuring costs.
The deal will generate about $250 million in additional cash
over three years, most of which will come from tax benefits, the
companies said.
Under the deal, ACS shareholders will get $63.11 a share,
through $18.60 in cash and 4.935 shares of Xerox. Xerox will also
assume $2 billion of ACS debt and issue $300 million of convertible
preferred stock.
In the call, the companies said they expect the cash portion to
be financed with $1 billion from combined company cash and existing
revolving credit agreements, along with $3 billion to be raised in
the capital markets.
-By Thomas Gryta; Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com