Xerox Holdings Corporation (NASDAQ: XRX) has announced its agreement to acquire Lexmark International, Inc. from Ninestar Corporation, PAG Asia Capital, and Shanghai Shouda Investment Centre in a deal valued at $1.5 billion, including assumed liabilities. The acquisition is expected to strengthen Xerox's core print portfolio and build a broader global print and managed print services business, better suited to meet the evolving needs of clients in the hybrid workplace.
The transaction is expected to bring together two industry-leading companies, with combined capabilities positioning Xerox to drive long-term profitable growth and serve clients, furthering its reinvention. The acquisition will allow Xerox to combine Lexmark’s solutions with Xerox® ConnectKey® technology and advanced print and digital services, creating a superior offering portfolio and increasing value for clients and partners.
Furthermore, the acquisition is expected to strengthen Xerox's ability to serve clients in the large, growing A4 color market and diversify its distribution and geographic presence, including in the APAC region. The new organization will serve more than 200,000 clients in 170 countries with 125 manufacturing and distribution facilities in 16 countries.
In terms of market share, combined, Lexmark and Xerox have a top five global share in each of the entry, mid, and production print markets and are key players in the large, stable managed print services market.
The transaction is expected to be immediately accretive to earnings per share and free cash flow. Xerox anticipates that the acquisition will accelerate the realization of its reinvention financial targets of revenue stabilization and double-digit adjusted operating income through an improved competitive position and exposure to faster-growing segments within print, as well as more than $200 million of identified cost synergies to be realized within two years of the transaction close.
Additionally, the transaction is expected to immediately reduce Xerox's pro forma gross debt leverage ratio and improve its balance sheet. Xerox plans to finance the acquisition with a combination of cash on hand and committed debt financing. In conjunction with this financing, the Xerox board of directors approved a change in the dividend policy to reduce the Xerox annual dividend from $1 per share to 50 cents per share.
The transaction is subject to regulatory approvals, approval of Ninestar’s shareholders, and other customary closing conditions and is expected to close in the second half of 2025. Until then, both Xerox and Lexmark will maintain their current operations and operate independently.
The financial advisor to Xerox is Jefferies LLC, and the legal advisors are Ropes & Gray LLP and Willkie Farr & Gallagher LLP. Morgan Stanley & Co. LLC is serving as the financial advisor to Lexmark, and Dechert LLP is serving as the legal advisor to Lexmark, Ninestar Corporation, PAG Asia Capital, and Shanghai Shouda Investment Centre.
Xerox will host an investor conference call today, December 23, 2024, at 8:00 am ET to discuss this transaction.
These details are based on the press release from Xerox Holdings Corporation. As a result of these announcements, the company's shares have moved 3.9% on the market, and are now trading at a price of $8.72. For more information, read the company's full 8-K submission here.
