Xerox announced on September 28, 2009, that it would acquire Affiliated Computer Services (ACS) in a cash-and-stock deal valued at $6.4 billion. That headline value was based on Xerox’s September 25 share price; an SEC-filed proxy later put the implied aggregate consideration at approximately $6.7 billion when it included preferred stock for ACS Class B shares. The acquisition closed on February 8, 2010.
Why did Xerox buy ACS?
Xerox said it wanted to expand beyond document technology into business process management and outsourcing. Its stated strategy was to combine its document systems with ACS’s expertise in managing and automating work processes. Ursula M. Burns, then Xerox’s chief executive, described the goal as “creating a new class of solution provider” in the companies’ September 28, 2009 announcement.
The announcement characterized ACS as a $6.5 billion business, citing 6 percent revenue growth and $1 billion in new business signings expressed as annual recurring revenue during fiscal 2009. Xerox estimated that its services revenue would increase from $3.5 billion in 2008 to $10 billion in 2010. That $10 billion figure was a company estimate at the time, not a reported result of the completed acquisition. Xerox also presented the opportunity as entry into a $150 billion business process outsourcing market and described the combined company as a $22 billion enterprise; those were company figures in the 2009 announcement.
What was the Xerox-ACS deal worth?
The $6.4 billion headline was the companies’ announced valuation of the cash-and-stock offer, expressed as $63.11 per ACS share using Xerox’s closing share price on September 25, 2009. The deal’s fixed exchange ratio meant the dollar value of the Xerox stock consideration could change as Xerox shares moved.
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| Valuation presentation | Amount | Basis |
|---|---|---|
| Announced value | $6.4 billion; $63.11 per ACS share | Companies’ September 28, 2009 announcement, calculated using Xerox’s September 25 closing share price. |
| Later implied aggregate consideration | Approximately $6.7 billion | SEC-filed 2009 merger proxy; includes the $300 million aggregate face amount of preferred stock for ACS Class B shares. |
The figures use different valuation presentations and should not be treated as identical totals. The proxy also illustrated the effect of the fixed exchange ratio: it stated that the offer represented approximately $63.11 per ACS Class A share using September 25 prices, but approximately $60.94 using Xerox’s December 22, 2009 share price. These are dated valuations, not a revised fixed cash amount.
How much did ACS shareholders get per share?
Under the merger terms filed with the SEC, each ACS Class A share was exchanged for $18.60 in cash and 4.935 Xerox shares. The exchange ratio was fixed, while the market value of the Xerox shares was not.
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ACS Class B consideration included those cash and common-stock components, plus a fraction of Xerox convertible preferred stock. Xerox also agreed to assume ACS debt. As a result, the $63.11 headline value is best understood as a share-price-based valuation of the announced offer, not a promise that every class received that amount in cash.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.When did Xerox complete the ACS acquisition?
- September 27, 2009: The merger agreement was dated.
- September 28, 2009: Xerox and ACS publicly announced the definitive agreement.
- November 16, 2009: The Hart-Scott-Rodino waiting period expired, according to the SEC merger proxy. The transaction also required shareholder approvals and satisfaction of other closing conditions.
- February 5, 2010: Shareholders approved the acquisition. 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 did so, 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 release, Xerox said ACS processed more than 1 million credit-card applications and 12 million student loans annually, and provided HR services for more than 4.4 million employees and retirees. Those volumes describe services the company reported; they do not establish the acquisition’s financial performance or prove that projected synergies were achieved.
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