Xerox Shells Out $6.4 Billion For Affiliated Computer Services

Xerox Corporation said that it would buy outsourcing specialist Affiliated Computer Services for a whopping $6.4 billion in cash and stock deal, the biggest acquisition in the history of the printing and copying group.

The deal would see propel Xerox in the megabucks sector of business process outsourcing, a natural extension for Xerox's business in document management and make the combined company "leading global enterprise for document and business process management.", according to the official press statement.

Lynn Blodgett, ACS's president and chief executive officer, said that "We’re proud of our significant profitable growth over the past 20 years and our ability to manage our clients’ operations with a global infrastructure and workforce".

According to experts, the acquisition of ACS will nearly triple Xerox's revenue over the next few years, from $3.5 billion in 2008 to $10 billion. In addition, Xerox is likely to achieve significant savings of around $400 million for the first three years after the acquisition is completed.

Even during the recession, outsourcing is growing steadily and is expected to become a $150 billion market where Xerox, as a $22 billion global enterprise, will play an increasingly important role.

ACS's core business is centered around data center management and outsourcing and employs more than 74,000 worldwide. The shares of ACS rose by 14.22 percent to reach nearly $54 over the last few hours.

In comparison, shares of Xerox corporation fell by 16 percent which means that at the time of writing, Xerox Corporation has a market capitalisation of $6.54 billion while ACS's is worth $5.26 billion.

Marketwatch has also identified Computer Sciences, Unisys, Amdocs and Hewitt Associates as potential acquisition targets and it is therefore not surprising that their share prices increased by up to 10 percent over the last few hours.

Our Comments

ACS will continue to live as an independent company within the Xerox conglomerate. The purchase of ACS by Xerox comes a few days after Dell purchased Perot Systems for $3.9 billion. The era of megabucks Mergers and Acquisitions is back and Wall Street bankers are likely to pat themselves on the back.

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