Xerox Corp. announced this morning a $6.4 billion dollar bid to acquire Affiliated Computer Services (ACS).
The deal is the second big industry acquisition in as many weeks. Last week computer hardware and IT services provider Dell bought Texas-based Perot System for $3.9 billion. ACS is the largest provider of managed services to government with over 1,700 federal, state, county and local government contracts.
Just last week, ACS signed a deal with the Louisiana Department of Social Services to administer transaction authorization processing, card management and helpdesk services for Louisiana’s Food Stamps program, also known as the Supplemental Nutrition Assistance Program (SNAP), and the Temporary Assistance for Needy Families (TANF) program. ACS performs similar work for sixteen other states and the federal government to deliver EBT services.
ACS shareholders would receive 63.11 per share in cash and Xerox stock, according to officials, giving the copier company a new revenue stream as an outsourcer and information services company. The combined company would create a $22 billion global enterprise for document technology and business process management, officials said in a statement.
ACS president and chief executive Lynn Blodgett said the deal would allow the ACS brand to expand globally through the Xerox name and “leading innovation.”
Ursula M. Burns, Xerox chief executive officer, said the deal was a “game-changer for Xerox.”
Foreign sales may be the biggest factor in the deal. According to Xerox, the company will use its established brand and client relations in Europe, Asia and South America to scale ACS’s business. ACS’s expertise is in managing paper-based work processes and providing specialized BPO and information technology services for industries that range from telecommunications, retail and financial services to healthcare, education and transportation. The BPO market is expected to reach $150 billion this year.
The company also expects to achieve annualized cost synergies in the range of $300 million to $400 million in the first three years by using ACS’s back-office expertise to handle Xerox’s internal functions..
Darwin Deason, founder and chairman of ACS, said the deal was a “tremendous outcome” for their shareholders, and that he’ll remain a “long-term investor.” The acquisition is still subject to government and regulatory approval.