Xerox announced on September 28, 2009, that it had agreed to acquire Affiliated Computer Services (ACS) in a cash-and-stock transaction it valued at $6.4 billion. The headline valuation used Xerox’s September 25 closing share price; a later SEC-filed merger proxy described approximately $6.7 billion in implied aggregate consideration when it included preferred stock for ACS Class B shares.
Why did Xerox buy ACS?
Xerox said ACS would help it expand beyond document technology into document and business-process management. Xerox brought document systems and services; ACS specialized in managing and automating work processes, including business-process outsourcing. Xerox CEO Ursula M. Burns described the intended combination as “a new class of solution provider” in the companies’ September 28, 2009 announcement.
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The companies presented the deal as a way to grow Xerox’s services business. Xerox characterized ACS as a $6.5 billion business with 6 percent revenue growth and $1 billion in new business signings, expressed as annual recurring revenue, during fiscal 2009. It estimated that Xerox services revenue would rise from $3.5 billion in 2008 to $10 billion in 2010. Those figures were part of Xerox’s 2009 case for the transaction; the $10 billion figure was an estimate, not a reported result.
The announcement also described a $150 billion business-process-outsourcing market and a $22 billion combined enterprise. These were company-presented figures, not independently established market measurements. Xerox’s strategic rationale was that combining its document capabilities with ACS’s process-management services could broaden its offerings and position it to pursue more outsourcing work; expected benefits and growth were management’s claims, not guaranteed outcomes.
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What was the Xerox–ACS deal worth?
The companies announced a value of $6.4 billion, or $63.11 per ACS share, using Xerox’s closing share price on September 25, 2009. That was the contemporaneous headline valuation, not a cash-only price. The later SEC-filed merger proxy gave a different valuation presentation: approximately $6.7 billion in implied aggregate consideration, including the $300 million aggregate face amount of preferred stock for ACS Class B shares.
| Valuation presentation | Amount and basis |
|---|---|
| September 28, 2009 announcement | $6.4 billion, stated as $63.11 per ACS share using Xerox’s September 25, 2009 closing price; Xerox and ACS announcement. |
| 2009 SEC-filed merger proxy | Approximately $6.7 billion in implied aggregate consideration, including $300 million aggregate face amount of preferred stock for ACS Class B shares; SEC-filed proxy. |
The two totals reflect different presentations of the consideration, especially the treatment of preferred stock; they should not be read as the same calculation. The proxy also noted that the exchange ratio was fixed while Xerox’s share price could move. At Xerox’s December 22, 2009 price, it said the offer represented approximately $60.94 per ACS Class A share, rather than the approximately $63.11 based on September 25 prices.
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How much did ACS shareholders receive per share?
Under the announced terms, each ACS Class A share was to be exchanged for $18.60 in cash plus 4.935 Xerox common shares. Because the share ratio was fixed, the dollar value of the Xerox stock component changed with Xerox’s market price before closing.
ACS Class B consideration also included a fraction of Xerox convertible preferred stock, in addition to the cash and Xerox shares. The preferred stock is why the proxy’s aggregate consideration calculation includes an additional $300 million in face value for Class B shares.
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When did Xerox complete the ACS acquisition?
- September 27, 2009: Xerox and ACS dated their merger agreement.
- September 28, 2009: The companies publicly announced the definitive agreement.
- November 16, 2009: The Hart-Scott-Rodino antitrust waiting period expired, according to the merger proxy. The transaction remained subject to other closing conditions, including shareholder approvals.
- February 5, 2010: Shareholders approved the transaction. More than 96 percent of Xerox shares voting at its special meeting voted in favor; more than 86 percent of the voting power of ACS Class A and Class B shares voted in favor, and the required majority-of-the-minority vote was met, according to the companies’ approval announcement.
- February 8, 2010: Xerox reported that it had completed the acquisition in its completion announcement.
In that completion announcement, Xerox described ACS service volumes including more than 1 million credit-card applications and 12 million student loans processed annually, and human-resources services for more than 4.4 million employees and retirees. These are company-reported descriptions of ACS’s operations at the time, not terms of the acquisition.
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