Xerox - Wave's eSign Systems.
Xerox To Buy Affiliated Computer For $6.4B
Xerox Inc. (XRX) agreed to buy business services provider Affiliated Computer Services Inc. (ACS) in a deal initially valued at $6.4 billion, as the copier company follows other tech giants in increasing its services revenue.
Xerox, Norwalk, Conn., has suffered from declining sales of copiers and printers, and the accompanying diminishing uses of ink, toner and paper. The deal for Dallas-based ACS is expected to triple Xerox's service revenue to an estimated $10 billion next year from 2008's $3.5 billion.
The move also represents the first bold move by Xerox Chief Executive Ursula Burns, who took over on July 1. Burns, who become the first African-American woman to head a Fortune 500 company, called the deal "a game-changer" for her company.
Xerox's agreement comes a week after Dell Inc. (DELL) agreed to buy information-technology service provider Perot Systems Corp. (PER) for $3.9 billion. The sector's recent merger activity - which includes Hewlett-Packard Co.'s (HPQ) purchase last year of Electronic Data Services - leaves Accenture PLC (ACN), Computer Sciences Corp. (CSC) and Unisys Corp. (UIS) as some of the larger services companies still independent.
Based on the closing prices Friday, Xerox's deal values ACS shares at $63.11 each, a 34% premium to Friday's closing price and 55 cents below the stock's all-time high set in February 2006. Holders would get $18.60 and 4.935 shares of Xerox for each ACS share. Xerox will also assume $2 billion of ACS debt and issue $300 million of convertible preferred stock.
The companies expect the cash portion to be financed with $1 billion from combined company cash and existing revolving credit agreements, along with $3 billion to be raised in the capital markets.
Xerox shares recently fell 17% to $7.44, reducing the deal's value to $55.31 an ACS share. ACS shares rose 14% to $53.60. Shares of Accenture rose 4.6% to $37.77 and Computer Sciences rose 4.6% to $53.15.
ACS' purchase prices is similar to the $6.2 billion offer made two years ago by Cerberus Capital Management. Some investors objected early to the proposal, reasoning that the board could get a more lucrative offer. But such a bid never materialized, and Cerberus pulled its offer, citing turmoil in credit markets. ACS eventually requested the resignations of five independent directors.
The combined Xerox-ACS company would have $22 billion of annual revenue, $17 billion of which coming in on a recurring basis. Up to $400 million in synergies are projected to be realized in the first three years after the deal's closing, slated for the first quarter, including $50 million to $75 million from restructuring.
Much of the cost savings will come from ACS actually performing services for Xerox that it normally provides for its other clients, executives said in a conference call Monday.
They highlighted the cross-selling opportunities and international expansion for the combined businesses as only 20% of their customers overlap.
"The lines between business process and document management are blurring," Ursula Burns, who stressed the revenue growth that could result from the combination, which is "significantly higher" than the cost savings.
ACS has a broad product pipeline that has insulated it from a broad downturn in information-technology spending, allowing the company to snap up smaller companies and hire new employees. It serves the commercial and government sectors through long-term contracts.
About a quarter of ACS' revenue comes from the healthcare sector, which includes commercial and government contracts. At an investor day earlier this month, ACS was confident that it could grow its Medicaid contracts as well as benefit from a push for more electronic health records, according to a J.P. Morgan research note.
Burns said that the healthcare presence of ACS was one of the major factors in making the deal.
Lynn Blodgett, chief executive of ACS, said the company retains a large amount of healthcare records, which can benefit from Xerox technology that helps analyze unstructured data and thus help clients move toward "outcome-based healthcare solutions."
"People in healthcare are very concerned about administrative costs...We can make that more efficient," Blodgett said.
Xerox Simplifies Loan Process with Electronic Signature; Supports Industry's Drive toward E-Mortgages
ROCHESTER, N.Y., June 12, 2008 -- In a move to help the mortgage industry process loans faster and enhance customer service, Xerox Mortgage Services has added e-signature - a secure and convenient way to complete mortgage loans without having to sign hardcopy documents. This enhancement builds upon Xerox's (NYSE: XRX) current Web-based BlitzDocs™ Collaboration Suite that uniquely supports paper, imaged and electronic loan documents.
Mortgage participants can now sign new or re-financed home loans online by simply pointing their mouse to, and clicking on, the document's signature line. Electronically signed documents are then securely managed and stored in a repository, known as an electronic vault. Audit tracking detects where the documents travel throughout the system to keep tabs on any transactions made during the loan lifecycle.
E-mortgage solutions allow mortgage lenders to turn loans around quicker with greater control, reduce printing and mailing costs, and make a positive impact on the environment.
"Mortgage lenders who embrace electronic signatures have a competitive advantage in today's complex marketplace," said Greg Smith, vice president, Xerox Mortgage Services. "Xerox's enhanced e-mortgage functions offer our customers the most comprehensive solution for paperless mortgage transactions in the industry."
Licensed through eSign Systems, a division of Wave Systems Corp. (NASDAQ: WAVX), the electronic signature capabilities will help expand the BlitzDocs' network of mortgage participants - giving users access to a larger pool of financial lending institutions and other service providers.
"For the mortgage industry to thrive it must drive down costs while improving customer service," said Jeanne Capachin, research vice president, IDC/Financial Insights. "Vendors that can arm their customers with a total package - the right combination of technology and services, will help the industry weather a challenging time."
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