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NEW YORK - Xerox Corp. has agreed to buy Affiliated Computer Services Inc. for about $5.75 billion in cash and stock, the companies announced Monday.
ACS is the contractor hired to carry out the Indiana Family and Social Services Administration's privatization of its food stamp program. The billion-dollar program has come under sharp criticism from lawmakers for failing to meet deadlines, and from customers and customer advocates who complain of long wait times, wrongly denied benefits and high error rates.
Last month, 13 Investigates learned that ACS was offering employees bonus incentives, including a new television, gift cards and a luxury vacation, in order to meet deadlines. The workers were hired at $9/hour and then were reduced to being paid per client call.
The deal calls for Xerox to pay $63.11 for each ACS shares and will create a $22 billion business that will mesh both printing and copying services with the information technology and outsourcing components of Dallas-based ACS.
"Acquiring ACS helps us expand our business and benefit from stronger revenue and earnings growth," Xerox CEO Ursula Burns said in a statement.
ACS, a $6.5 billion company, had fiscal 2009 revenue growth of 6 percent and new business signings of $1 billion in annual recurring revenue.
ACS stockholders will receive $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. Xerox, based in Norwalk, Conn., will also take on $2 billion of ACS's debt and issue $300 million of convertible preferred stock to ACS's Class B shareholder.
With about 91 million ACS shares outstanding, that would value the deal at $5.75 billion. The companies are valuing the deal at $6.4 billion.
The acquisition, which was approved by both companies' boards, is anticipated to add to adjusted earnings results in the first year.
Xerox expects to save $300 million to $400 million in the first three years after the deal closes, which is targeted for the first quarter of 2010.
ACS will function independently upon the transaction's completion, and will initially be branded as ACS, a Xerox Co. The company will be headed by its CEO Lynn Blodgett, who will report to Burns.
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