Xerox To Sell Information Technology Outsourcing Business To Atos For $1.05 Bln

(RTTNews) - French multinational IT services company Atos SE agreed Thursday to acquire the information technology outsourcing (ITO) business of printer and copier maker Xerox Corp. (XRX) for $1.05 billion in cash. The deal also call for an additional consideration of $50 million subject to the condition of certain assets at closing.

"Atos is a company with whom we've had a long relationship in several capacities. 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," Xerox Chairman and CEO Ursula Burns said in a statement.

The deal will enable Atos to nearly triple its size in the U.S. by adding Xerox's blue-chip ITO clients to its portfolio. Meanwhile, Xerox's existing ITO clients will gain access to Atos' global IT services capabilities and a broad range of cutting-edge services.

It will also broaden Atos' geographic footprint to provide support to its European and U.S. clients anywhere in the world.

Meanwhile, the deal will enable Xerox to increase its focus on its BPO and document outsourcing businesses within its services segment. It will also see Atos becoming one of Xerox's primary IT services providers.

Bezons, France-based Atos and Xerox already have a running strategic collaboration between them spanning several years. Xerox currently uses Atos for ITO work in Europe.

The proposed deal will now enable new levels of collaboration in client situations and innovative solutions leveraging Atos' world-class ITO capabilities and Xerox's BPO and document outsourcing expertise.

The proposed deal, which has the unanimous support of the boards of directors of both companies, is expected to close in the first half of 2015. The closure of the deal is primarily subject to regulatory and antitrust approvals.

Xerox's ITO business is estimated to generate 2014 revenue of $1.5 billion. The Xerox ITO leadership team will also join Atos.

"Increasing our position in the U.S. is a major step in the completion of our three year strategic plan and responds to a strong demand from our global customers. This transaction will allow us to strengthen our footprint in the U.S. market.....," Atos Chairman and CEO Thierry Breton stated.

New York-based Xerox now expects to report the IPO business as a discontinued operation as a result of the pending sale. This represents an estimated net $1.3 billion in third-party services segment revenue and an estimated $115 million in services segment profit for fiscal 2014.

As a result, Xerox currently projects full-year 2014 earnings from continuing operations in a range of $0.87 to $0.89 per share and adjusted earnings in the range of $1.04 to $1.06 per share. Previously, the company forecast earnings in the range of $0.93 to $0.95 per share and adjusted earnings in the range of $1.11 to $1.13 per share.

For the fourth quarter of fiscal 2014, Xerox now expects earnings from continuing operations in the range of $0.24 to $0.26 per share and adjusted earnings in the range of $0.28 to $0.30 per share.

On average, analysts polled by Thomson Reuters currently expect the company to report earnings of $0.31 per share for the fourth quarter and $1.12 per share for the full-year 2014. Analysts' estimates typically exclude special items.

Looking ahead to fiscal 2015, Xerox now expects earnings from continuing operations in a range of $0.88 to $0.94 per share and adjusted earnings in the range of $1.05 to $1.11 per share. Previously, the company expected earnings from continuing operations in the range of $0.93 to $0.99 per share and adjusted earnings of $1.11 to $1.17 per share. Street is currently looking for full-year 2015 earnings of $1.17 per share.

Additionally, Xerox expects initial net after-tax proceeds from the transaction of about $850 million as well as plans to increase its 2015 capital allocation for repurchasing shares to about $1.0 billion and up to $900 million for acquisitions.

XRX closed Thursday's regular trading session at $13.89, up $0.43 or 3.19% on a volume of 6.38 million shares. The stock gained a further $0.51 or 3.67% in after-hours trading.

Atos closed in Paris at 59.80 euros, up 2.27 euros or 3.95% on a volume of 0.29 million shares.