Xerox snaps up ACS in $6.4bn deal

Xerox said Monday it will buy Affiliated Computer Services (ACS) in a cash and stock deal valued at $6.4bn.

The move is a big bet to transform Xerox into a services company that does everything from collecting tolls and installing government systems to retooling business processes and information technology outsourcing.

Xerox, which is in a dogfight with HP for print managed services, is apparently looking for more foot soldiers to cross sell everything from process overhauls to document management programs. After all, HP can use its EDS army to sell print managed services in addition to other items. ACS had $1bn in recurring revenue during fiscal 2009.

Under the deal, Xerox will have a $22bn company with $17bn in recurring revenue. When you combine the Xerox deal with Dell’s purchase of Perot Systems last week you arrive at an easy conclusion: Everyone wants to be a services company.

Xerox is valuing ACS at $63.11 a share, up from ACS’ closing price of $47.50.

ACS shareholders get $18.60 in cash and 4.935 Xerox shares for each share they own. Xerox picks up ACS’ $2bn debt.

While the deal is about growth, there will however be some savings. Xerox said it will save $300m to $400m annually in the first three years once the deal closes. The savings are related to back office, procurement and the costs related to running a public company.

The deal has been approved by the boards of Xerox and ACS and by an ACS special committee. It is expected to close in the first quarter of 2010.

Original article: Xerox buys ACS; Makes its big services bet from ZDNet.com