Xerox will buy business process outsourcer ACS for $US6.4B

With the deal, Xerox hopes to expand its market beyond document management

Xerox has agreed to buy business process outsourcer Affiliated Computer Services (ACS) for $US6.4 billion, in a move it hopes will allow it to expand beyond the field of document management.

The deal will triple Xerox's revenue from services, from $US3.5 billion a year to $US10 billion a year, the company said Monday.

Dallas-based ACS was one of a shrinking band of outsourcers not yet tied to a hardware vendor.

Coming hot on the heels of Dell's announcement last week that it will buy Perot Systems for $US3.9 billion, the Xerox-ACS deal could increase the pressure on other independents, including CSC, Unisys and Indian companies such as Wipro and Infosys Technologies, to find a suitor.

The name of another former independent, EDS, disappeared last week when its brand was subsumed into that of Hewlett-Packard, which acquired it last year.

Around the world, ACS's 74,000 employees work in finance, human resources, IT support, and customer care. For the year to June 30, ACS reported revenue of $US6.52 billion, up 6 percent on the previous year.

Around 40 percent of that came from government customers, making ACS one of the largest providers of managed services to U.S. government bodies.

Xerox's 54,000 staff work on document management technologies and services, as well as on the company's historic photocopier business.

The company reported a 2.2 percent year-on-year rise in revenue for its 2008 fiscal year, to $US17.61 billion, of which 26.6 percent came from equipment sales.

As a subsidiary of Xerox, ACS will operate as an independent business run by its current CEO, Lynn Blodgett.

The offer price of $US6.4 billion is a little above the $US6 billion proposed by ACS founder Darwin Deason when he offered to take the company private in March 2007.

Xerox will pay about 30 percent of the purchase price in cash, and the rest in stock, based on its closing share price Friday.

It expects the deal to close in the first quarter of next year, subject to approval from regulatory authorities and the companies' stockholders.

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Peter Sayer

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