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Xerox to Acquire Affiliated Computer Services

September 28, 2009
NORWALK, CT/DALLAS—Sept. 28, 2009—Xerox Corp. (NYSE:XRX) and Affiliated Computer Services, Inc. (NYSE: ACS) today announced a definitive agreement for Xerox to acquire ACS in a cash and stock transaction valued at $63.11 per share or $6.4 billion as of the closing price of Xerox stock on Sept. 25. This acquisition will transform Xerox into the leading global enterprise for document and business process management, and will accelerate its growth in an expanding market.

The world's largest diversified business process outsourcing (BPO) firm, ACS is a $6.5 billion company with revenue growth of 6 percent and new business signings of $1 billion in annual recurring revenue during its fiscal 2009.

"By combining Xerox's strengths in document technology with ACS's expertise in managing and automating work processes, we're creating a new class of solution provider," said Ursula M. Burns, Xerox chief executive officer.  "A game-changer for Xerox, acquiring ACS helps us expand our business and benefit from stronger revenue and earnings growth.

"Xerox becomes a $22 billion global company, of which $17 billion is recurring revenue - a significant boost to our profitable annuity stream," she added.  "The revenue we generate from services will triple from $3.5 billion in 2008 to an estimated $10 billion next year."

Under the terms of the agreement, ACS shareholders will receive a total of $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. In addition, Xerox will assume ACS's debt of $2 billion and issue $300 million of convertible preferred stock to ACS's Class B shareholder. On an adjusted earnings basis, the transaction is expected to be accretive in the first year.

"We're proud of our significant profitable growth over the past 20 years and our ability to manage our clients' operations with a global infrastructure and workforce," said Lynn Blodgett, president and chief executive officer, ACS.  "We also know that for ACS to expand globally and differentiate our offerings through technology, we need a partner with tremendous brand strength and leading innovation.  Xerox offers that and more to bring our business to the next level while strengthening theirs."

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.  Business process outsourcing is estimated to be a $150 billion market, growing at a rate of 5 percent per year.  Through its multi-year contracts with more than 1,700 federal, state, county and local governments, ACS is the largest provider of managed services to government entities in the United States. 

"When ACS was founded, we had a vision of becoming a best-in-class company by working harder than our competitors. More than 20 years and 74,000 employees later, as the world's top BPO company, we have now found a partner to help us reach even greater heights," said Darwin Deason, founder and chairman of ACS.  "This is a tremendous outcome for our shareholders driven by the commitment of a strong management team and incredibly dedicated employees.  At closing, I will become one of the combined company's largest individual shareholders, and I intend to remain a long-term investor because I could not be more optimistic about the future of the combined company."

With this acquisition, Xerox is confident it will achieve significant incremental revenue growth by leveraging Xerox's strong global brand and established client relationships to scale ACS's business in Europe, Asia and South America.  In addition, Xerox will integrate its intellectual property with ACS's services to create new solutions for end-to-end support of customers' work processes.

Xerox expects to achieve annualized cost synergies that will increase to the range of $300 million to $400 million in the first three years following the close of the transaction. The synergies are primarily based on expense reductions related to public company costs, procurement and using ACS's expertise in back-office operations to handle some of Xerox's internal functions.

The transaction, which has been approved by the Xerox and ACS boards of directors and ACS special committee, is expected to close in the first quarter of 2010.  ACS will operate as an independent organization and initially will be branded ACS, a Xerox Company.  It will be led by Lynn Blodgett, who will report to Ursula Burns.

The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of ACS and Xerox stockholders. 

About Affiliated Computer Services
Headquartered in Dallas, ACS 74,000 professionals support thousands of multinational corporations and government agencies in over 100 countries from 500 locations. It offers business process outsourcing support in areas that include finance, human resources, information technology, transaction processing, and customer care. http://www.acs-inc.com

About Xerox
Headquartered in Norwalk, Conn., Xerox Corporation's 54,000 people represent the world's leading document management, technology and services enterprise, providing the industry's broadest portfolio of color and black-and-white document processing systems and related supplies, as well as document management consulting and outsourcing services. http://www.xerox.com

Advisors
Simpson Thacher & Bartlett LLP acted as legal counsel and J.P. Morgan and Blackstone Advisory Partners acted as financial advisors to Xerox in connection with the transaction. Cravath, Swaine & Moore LLP served as legal counsel and Citigroup Global Markets Inc. served as financial advisor to ACS.  Ropes & Gray LLP acted as legal advisor and Evercore Partners acted as financial advisor to the special committee of the Board of Directors of ACS.
 

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