Xerox has made a significant move by acquiring Lexmark International, a manufacturer of laser printers and imaging products, in a deal valued at $1.5 billion, which includes debt and other liabilities. This strategic acquisition aims to bolster Xerox's core print portfolio. The purchase is set to be financed through the company's cash reserves and committed debt financing, highlighting Xerox’s proactive approach in a competitive market.
Following the announcement, Xerox's stock surged over 7% in pre-market trading on Monday. The chief executive of Xerox, Steve Bandrowczak, emphasized the importance of this acquisition, stating, 'Our acquisition of Lexmark will bring together two industry-leading companies with shared values, complementary strengths, and a deep commitment to advancing the print industry to create one stronger organization.' He added that by merging their capabilities, both companies will be better positioned to achieve long-term profitable growth and meet the needs of their clients effectively, which is a critical part of Xerox’s continued reinvention in the industry. This transaction, however, requires regulatory approval as well as the endorsement from Ninestar's shareholders, indicating that while the deal is promising, it is still a work in progress.
The expected completion timeline is set for the second half of the next fiscal year. Until then, both Xerox and Lexmark will operate independently, maintaining their current operations. Xerox anticipates that acquiring Lexmark will enhance its ability to cater to A4 color paper clients and expand its distribution capabilities across various regions, particularly in the Asia Pacific.
With this new merger, the combined entity is on track to serve over 200,000 clients worldwide, supported by 125 manufacturing and distribution facilities across 16 countries. Financial projections suggest that this deal will instantly improve Xerox's per-share earnings and free cash flow. The company also forecasts significant cost synergies, estimating that over $200 million could be saved within just two years following the acquisition's completion.
This is part of Xerox's broader strategy to stabilize revenue and achieve double-digit adjusted operating income. In light of this acquisition and its financial implications, Xerox's board of directors has authorized a reduction in its annual dividend from $1 to $0.50 per share. This adjustment is directly related to the funding of the acquisition, providing the company with additional capacity to manage its debt.
The revised dividend is expected to be declared in the first quarter of 2025, reflecting a strategic shift as Xerox looks to solidify its position in the market while managing its financial commitments responsibly..