Is Xerox set to acquire ACS for $6.4 in 2009?

Xerox, the global copier and imaging giant, will pay $6.4 billion to acquire the outsourcing company Affiliated Computer Services, expanding its foothold in a growing industry, the companies said.

Xerox, based in Norwalk, Conn, is paying $63.11 a share in cash and stock for ACS, which posted revenue growth of 6% and new business signings of $1 billion in annual recurring revenue during its fiscal 2009.

“We’re creating a new class of solution provider,” Xerox’s chief executive, Ursula M Burns, said in a statement, adding that the deal was “a gamechanger for Xerox.” She estimated the company’s revenue from services would triple to $10 billion next year from $3.5 billion in 2008. Lynn R Blodgett, ACS’s chief executive, said in the statement that the deal was necessary “to expand globally and differentiate our offerings through technology.” ACS will continue to operate as an independent organization. Blodgett will remain as chief executive, reporting to Burns.
It was the first major deal for Burns, who took over Xerox in July with the retirement of Anne M Mulcahy.

Owners of ACS stock will receive $18.60 a share in cash and 4.935 Xerox shares for each ACS share. Xerox will assume $2 billion in ACS debt and issue $300 million of convertible preferred stock to ACS’s Class B shareholders. ACS had a market value Friday at the close of trading of $4.6 billion. Xerox said the transaction would add to profit in the first year on an adjusted-earnings basis.

ACS, based in Dallas, specializes in outsourcing processes for industries including telecommunications, retail and financial services and health care, and describes itself as the largest provider of managed services to government entities in the United States. The companies estimated the market for so-called business process outsourcing at $150 billion, growing at a rate of 5% a year.

JP Morgan Chase and Blackstone Advisory Partners acted as financial adviser to Xerox, while Citigroup Global Markets served as financial adviser to ACS

Agencies

No global impact; ACS to hire 1,000 in India

Amid gloomy scenario in the global job markets, hiring in India is continuing at a strong pace with world's largest business process ou tsourcing firm Affiliated Computer Services planning to recruit 1,000 people in the next 6-8 months in the country.

"We are looking to increase our headcount by 1,000 employees in India in the next 6-8 months, out of which about 500 would be employed in our new facility at Noida, which is in the process of being set up," ACS India Country Head and Vice President Aman Mustafa said.

The company is in the process of setting up a new facility in Noida, while it already has offices in Bangalore, Kochi and Chennai and the total employee strength of the company is around 5,000 in the country. Bangalore operation has a capacity of about 2,800 people and around 1,800 people are stationed in Kochi.

"Despite the global economic crisis our business has not been affected and our existing and new clients have been approaching us for services to reduce their costs," Mustafa said.

Mustafa further said that ACS Inc's balance sheet is stable with strong cash flows amid the economic downturn, even as its shares have taken a beating at the New York Stock Exchange. The global firm has a market capitalisation of over 3.86 billion dollar.

Recently, a host of firms, including Metlife India, Deloitte Touche Tohmatsu, State Bank of India, Larsen and Toubro are planning to recruit over 70,000 people in the country.