Blog Publisher’s Comments:
Evidently, “historic days” include the day
when a big non-core-business acquisition “gets done” AND the day when
that same non-core-business acquisition gets “undone.” I guess it’s a matter of perspective; one can
put a positive spin on anything, even on something that deserves no positive
spin, at all.
when a big non-core-business acquisition “gets done” AND the day when
that same non-core-business acquisition gets “undone.” I guess it’s a matter of perspective; one can
put a positive spin on anything, even on something that deserves no positive
spin, at all.
In early 2010, Xerox completed the
acquisition of Affiliated Computer Services, a business services enterprise,
one certainly not directly related to Xerox’s core business. It was the largest acquisition Xerox ever
did.
acquisition of Affiliated Computer Services, a business services enterprise,
one certainly not directly related to Xerox’s core business. It was the largest acquisition Xerox ever
did.
Now, some seven years later, Xerox has
completed the spin-off of that business (which is now known as Conduent) into a
separate NYSE publicly-traded company.
So much for the high hopes that Xerox once had for the diversification
ACS’s business represented. In other
words, IT DID NOT WORK.
completed the spin-off of that business (which is now known as Conduent) into a
separate NYSE publicly-traded company.
So much for the high hopes that Xerox once had for the diversification
ACS’s business represented. In other
words, IT DID NOT WORK.
XEROX COMPLETES THE PREVIOUSLY
ANNOUNCED SEPARATION OF CONDUENT
ANNOUNCED SEPARATION OF CONDUENT
January 3rd, 2017
Xerox (NYSE: XRX)
today announced it has completed the separation of Conduent Incorporated (NYSE:
CNDT),
creating two market-leading, publicly- traded companies.
today announced it has completed the separation of Conduent Incorporated (NYSE:
CNDT),
creating two market-leading, publicly- traded companies.
“Today
is an historic day for Xerox. The successful completion of the separation
sharpens our market focus and commitment to our customers,” said Xerox CEO Jeff
Jacobson. “I am confident the transformational actions we are
implementing position Xerox for long-term success and unlocks shareholder
value.”
is an historic day for Xerox. The successful completion of the separation
sharpens our market focus and commitment to our customers,” said Xerox CEO Jeff
Jacobson. “I am confident the transformational actions we are
implementing position Xerox for long-term success and unlocks shareholder
value.”
Members of the company’s executive leadership team,
employees and customers will celebrate the milestone by ringing the opening
bell at the New York Stock Exchange (NYSE) tomorrow, Jan. 4, 2017.
employees and customers will celebrate the milestone by ringing the opening
bell at the New York Stock Exchange (NYSE) tomorrow, Jan. 4, 2017.
Xerox’s focus on growing its global leadership in digital
print technology and services will help customers innovate how they
communicate, connect and work more productively. The company’s financial model
and revitalized business strategy will enable strong free cash flow generation
and margin expansion, as well as targeted investments in attractive growth
areas, such as document outsourcing and solutions for small- and medium-sized
businesses.
print technology and services will help customers innovate how they
communicate, connect and work more productively. The company’s financial model
and revitalized business strategy will enable strong free cash flow generation
and margin expansion, as well as targeted investments in attractive growth
areas, such as document outsourcing and solutions for small- and medium-sized
businesses.
Under the terms of the separation, on the distribution
date of Dec. 31, 2016, Xerox shareholders received one share of Conduent common
stock for every five shares of Xerox common stock they held as of the close of
business on Dec. 15, 2016, the record date for the distribution.
date of Dec. 31, 2016, Xerox shareholders received one share of Conduent common
stock for every five shares of Xerox common stock they held as of the close of
business on Dec. 15, 2016, the record date for the distribution.
In connection with the spin-off, Xerox received a cash
transfer from Conduent of $1.8 billion, which it intends to use, along with
cash on hand, to retire approximately $2.0 billion in debt.
transfer from Conduent of $1.8 billion, which it intends to use, along with
cash on hand, to retire approximately $2.0 billion in debt.
Article
that appeared in the Wall Street Journal early in 2016:
that appeared in the Wall Street Journal early in 2016:
Xerox and ACS: A Troubled Deal from
the Start
the Start
By MAUREEN FARRELL (for the Wall Street Journal)
Jan 29, 2016 10:16 am ET
Xerox is reversing course.
The company on Friday announced
that it’s splitting into two, a move that essentially reverses its
2010 deal to buy Affiliated Computer Services Inc.
for roughly $6 billion.
that it’s splitting into two, a move that essentially reverses its
2010 deal to buy Affiliated Computer Services Inc.
for roughly $6 billion.
The deal was the largest in Xerox’s long and storied
history, but it has done little to help Xerox’s shareholders.
history, but it has done little to help Xerox’s shareholders.
When the deal was announced
in 2009, it was considered a big gamble by Ursula Burns, who
was just months into her tenure as Xerox’s chief executive. With the deal, she
was seeking to bolster Xerox’s traditional copier and printer business by
expanding into business services.
in 2009, it was considered a big gamble by Ursula Burns, who
was just months into her tenure as Xerox’s chief executive. With the deal, she
was seeking to bolster Xerox’s traditional copier and printer business by
expanding into business services.
Investors were immediately disenchanted by the news,
sending the stock down 14% on the day of announcement.
sending the stock down 14% on the day of announcement.
Nearly six years later, the stock is roughly flat, while
the market capitalization of the company is way down. Revenues are down,
and headcount is up.
the market capitalization of the company is way down. Revenues are down,
and headcount is up.
The biggest winners from the deal seem to be the
investment banks, which generated hefty fees in 2009, and a new slate of banks
that are poised to reap between $35 million and $45 million this time around.
investment banks, which generated hefty fees in 2009, and a new slate of banks
that are poised to reap between $35 million and $45 million this time around.
The company defends the ACS deal. While a spokesman
declined to comment Friday on the stock price, he said that Xerox has achieved
most of its goals for the acquisition, including “significant cost
synergies, expanding our portfolio, brand equity and innovation
capabilities.”
declined to comment Friday on the stock price, he said that Xerox has achieved
most of its goals for the acquisition, including “significant cost
synergies, expanding our portfolio, brand equity and innovation
capabilities.”
Here’s
a look at Xerox then and now:
a look at Xerox then and now:
Revenue:
At the time of the Xerox-ACS deal: Xerox
and ACS said they would have
annual revenue of more than $22 billion and estimated that 80% of
that would be recurring payments for leases, supplies and long-term services
contracts.
and ACS said they would have
annual revenue of more than $22 billion and estimated that 80% of
that would be recurring payments for leases, supplies and long-term services
contracts.
2016: The two companies had $18
billion in combined revenue for 2015 or an 18% decrease from what they
estimated at the time of the ACS-merger announcement. Xerox estimates that its
document management and document outsourcing generated approximately $11
billion in 2015, while its business process outsourcing company generated about
$7 billion in revenue in 2015.
billion in combined revenue for 2015 or an 18% decrease from what they
estimated at the time of the ACS-merger announcement. Xerox estimates that its
document management and document outsourcing generated approximately $11
billion in 2015, while its business process outsourcing company generated about
$7 billion in revenue in 2015.
Market
Valuation:
Valuation:
Xerox-ACS deal: At the end of 2010, about 10 months
after the ACS deal closed, the combined company was valued by the market at
nearly $15 billion, according to Capital IQ.
after the ACS deal closed, the combined company was valued by the market at
nearly $15 billion, according to Capital IQ.
2016: The market cap of Xerox currently
stands around $9.4 billion, down about 37% from the end of 2010, as the company
has repurchased more than 380 million shares since the deal was completed.
stands around $9.4 billion, down about 37% from the end of 2010, as the company
has repurchased more than 380 million shares since the deal was completed.
Fees:
Xerox-ACS deal: Xerox paid roughly $40 million in
fees to its advisors, which included Blackstone Advisory Partners and J.P. Morgan Chase & Co., and ACS paid
out roughly $48.5 million in fees to its advisors Citigroup and Evercore Partners, according to Freeman
& Co.
fees to its advisors, which included Blackstone Advisory Partners and J.P. Morgan Chase & Co., and ACS paid
out roughly $48.5 million in fees to its advisors Citigroup and Evercore Partners, according to Freeman
& Co.
Separately, the sale of ACS gave the company’s founder
Darwin Deason a rich payday, as he generated
an estimated $800 million in a mix of cash and Xerox stock. Citigroup had
previously advised Mr. Deacon and Cerberus Capital Management on an attempted
$6.4 billion takeover of ACS in 2007, a deal that fell apart.
Darwin Deason a rich payday, as he generated
an estimated $800 million in a mix of cash and Xerox stock. Citigroup had
previously advised Mr. Deacon and Cerberus Capital Management on an attempted
$6.4 billion takeover of ACS in 2007, a deal that fell apart.
2016: There’s an entirely new slate of
investment banks this time around, but Freeman & Co. estimates that they
generate between $35 million and $45 million on the deal. Lazard and Goldman Sachs & Co. are advising
Xerox, while Centerview Partners is advising Xerox’s board.
investment banks this time around, but Freeman & Co. estimates that they
generate between $35 million and $45 million on the deal. Lazard and Goldman Sachs & Co. are advising
Xerox, while Centerview Partners is advising Xerox’s board.
Employees:
Xerox-ACS deal: At the time, ACS had 74,000
workers compared to 54,000 at Xerox, for a combined 128,000 people.
workers compared to 54,000 at Xerox, for a combined 128,000 people.
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2015: Headcount is up since the ACS deal,
despite several rounds of layoffs in recent years. As of Sept. 2015, the
company estimated that it had 140,800 employees worldwide. That figure did not
include Xerox’s Information Technology Outsourcing, which it sold in late 2014
and had roughly 9,200 employees.
despite several rounds of layoffs in recent years. As of Sept. 2015, the
company estimated that it had 140,800 employees worldwide. That figure did not
include Xerox’s Information Technology Outsourcing, which it sold in late 2014
and had roughly 9,200 employees.
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