Xerox Expands Into Outsourcing With $6.4 Billion ACS Deal

Norwalk, CT (AHN) – Xerox Corporation will pay $6.4 billion for Affiliated Computer Services in a deal that will expand its business into the area of outsourced information technology services..

The acquisition, announced Monday, will have the photocopier giant take on $2 billion in ACS debt. Xerox also will issue $300 million in convertible preferred stock to ACS’s Class B shareholder.

When the takeover is completed in the first quarter of 2010, ACS will operate as a stand-alone firm. Some 1,700 federal, state, county, and local governments outsource their business processes to ACS.

Ursula M. Burns, Xerox’ chief executive officer, called the deal “a game changer for Xerox” in a statement. “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.”

Xerox said it expects the transaction to triple sales from services to about $10 billion.

Investors responded on the news by selling Xerox (XRX) stock, causing its price to drop 17.46 percent to $7.41 just before noon EDT. ACS (ACS) rose 12.8 percent to $53.30

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