Frances Atos SE agreed to purchase Xeroxs information technology outsourcing business in an €840 million ($1.05 billion) all cash deal, heavily boosting its presence in the US.
“Increasing our position in the US is a major step in the completion of our three year strategic plan and responds to a strong demand from our global customers.” said Atos CEO Thierry Breton.
The acquisition is in line with Mr. Brentons intentions to turn more attention to the fast-developing area of cloud computing.
Bezons, France-based Atos said the deal would almost triple its operations in the US, making it its biggest market. After the deal the multinational IT services corporation would become the main IT provider for Xerox, further expanding its partnership.
Xerox has established long-standing relationship with Atos, providing financial, print and human resource services. While Atos supplies IT solutions for Xeroxs operations in Europe.
Under the deal Xerox might receive and additional $50 million based on the condition of certain assets when the agreement is completed. However, the acquisition is subject to regulatory approval, the companies said. They expect the deal to close during the first half of 2015.
Xeroxs IT outsourcing business employs around 9 800 people in 45 countries, including 4 500 in the US. The unit is projected to report a revenue of $1.5 billion for the full year.
Xerox said it expect to receive around $850 million, after tax, from the deal. The company said it would use the funds to increase its 2015 capital allocation for repurchasing shares to around $1.0 billion and also boost its acquisition spending to $900 million. Additionally, Xerox decreased its previous Q4 projection of earnings per share to range between $0.30 to $0.32. The company now sees per-share earnings at $0.28 to $0.30.
“Selling the ITO business to Atos gives our clients around the globe an expanded, world-class suite of IT capabilities that complement Xerox’s industry leading BPO and document outsourcing solutions,” said Xerox’s CEO Ursula Burns.
Ms. Burns is putting an effort in shifting the focus of the company to higher-margin business services in order to cope with the decrease of document printing.
Xerox Corp gained 0.82% on Wednesday and an additional 3.19% on Thursday to close at $13.89 in New York. The stock edged up 3.02% to $14.31 in pre-market trading on Friday at 10:20 GMT.
Atos SE gained 3.95% on Thursday and closed at €59.80 in Paris. On Friday the stock jumped 5.47% to trade at €63.07 at 10:20 GMT, marking a one-year decrease of 0.16%. The company is valued at €6.04 billion. According to the Financial Times, the 18 analysts offering 12-month price targets for Atos have a median target of €69.00, with a high estimate of €84.00 and a low estimate of €52.40. The median estimate represents a 15.38% increase from the last close price of €59.80.
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