Atos Deal to Acquire $1.1 Billion Outsourcing Business from Xerox Makes U.S. its Largest Market

Printer and office software maker Xerox Corp. (XRX) has agreed to sell its IT outsourcing operations to Atos SE for $1.05 billion, almost tripling the French buyer's U.S. revenue and making America its largest market. Bezons-based Atos said Friday, Dec. 19, it will pay $950 million for the operation, plus a further $100 million to cover tax benefits linked to the deal, and could eventually pay another $50 million depending on future performance of the unit. Based on the $950 million enterprise value, the price equates to about 8.7 times the division's operating profit. Atos has been expanding through acquisitions, buying in expertise and market share in cloud computing technology, system integration consulting and cyber security. Atos in May struck a a‚¬620 million ($761 million) deal for French rival Bull SA, to become Europe's biggest supplier of services for cloud computing, which enables the storage of information on central servers to be located remotely. For Xerox, of Norwalk, Conn., the sale serves to offload one of its slower-growing units as CEO Ursula Burns refocuses the business on higher-margin, larger operations including business process outsourcing and document-management outsourcing. Xerox said it expected to book about $850 million from the deal. That cash will go towards an about $900 million war chest set aside for acquisitions, and to help fund $1 billion of share buybacks scheduled for 2015. Xerox's IT outsourcing business made about $1.5 billion of sales in 2014 and about $110 million in operating profit. Of those sales, about $240 million came from Xerox itself, which will sign a long-term services agreement with Atos. The transaction is expected to close in the first half of 2015.

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