Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Merger or Acquisition (September 2009)
24 slides from Xerox's merger presentation, Sep 28, 2009
Slide 1: Xerox to Acquire Affiliated Computer Services
Xerox to Acquire Affiliated Computer Services Ursula Burns Chief Executive Officer, Xerox Larry Zimmerman Vice Chairman & CFO, Xerox Lynn Blodgett President and Chief Executive Officer, ACS September 28, 2009
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to ide
Slide 3: Xerox to Acquire ACS
Xerox to Acquire ACS • Compelling financial combination with strong strategic opportunities for growth by leveraging: – Xerox’s industry-leading document Creates a new class of management, brand strength, solutions provider with global account management and R&D investments. leading technology and –
Slide 4: Transaction Overview
Transaction Overview Key Transaction Terms • Xerox acquires 100% of ACS Class A and Class B common stock • Consideration of approximately 70% stock and 30% cash • ACS shareholders will receive 4.935 Xerox shares and $18.60 in cash for each Class A and Class B share • Transaction includes refinancing
Slide 5: Xerox + ACS: A New Class of Solutions Provider
Xerox + ACS: A New Class of Solutions Provider Evolving market demand… …requires a new solutions provider • The lines between business process • World leader in document and and document management are business process management blurring • Global delivery network • Customers need service providers
Slide 6: ACS Today
ACS Today ACS is the largest worldwide diversified business Revenue and operating margin1 ($B) process outsourcing company Revenue Operating margin • Diversified portfolio of BPO services 10.9% 10.6% 10.5% 10.5% • Vertical focus on education, transportation, communication, healthcare, federal/ state
Slide 7: The combination of Xerox and ACS yields a strong financial model
The combination of Xerox and ACS yields a strong financial model World leader in document and business process management Total Revenue $22B LTM Annuity Revenue ~80% total revenue Services Revenue $10B LTM Operating Margin Accelerated expansion Adjusted EPS CAGR1 Double digit growth Free Cash Flow1
Slide 8: Complementary Businesses
Complementary Businesses Significant scale Significant Significant $22B revenue international expansion cross-selling opportunities Nearly 50% services opportunities ~20% customer overlap 1 Xerox LTM 6/30 revenue ACS FY2009 revenue Combined ITO Equipment Equipment $1.4B Sales Sales 21% $4.0B Product
Slide 9: Material Synergies
Material Synergies Expense Synergies • Year 1 pre-tax cost synergies > $95M • Overlapping public company costs • $300M to $400M in annualized pre-tax • Cross-deploy Xerox technology and ACS’s cost synergies in three years process expertise to increase automation and efficiency • Synergy assumption i
Slide 10: A Compelling Financial Profile
A Compelling Financial Profile • Enhanced profitability and growth profile Attractive • Recurring, annuity business model Financial Model • Accelerated margin expansion • Strong and consistent revenue and cash flow • Significant synergy potential arising from new revenue opportunities Opportunity an
Slide 11: A Powerful Value Proposition
A Powerful Value Proposition • Transformational transaction that creates a new class of solutions provider • Leverages the strengths of two best-in-class companies to create a global, diversified leader in providing document management and services • Enhances Xerox’s strategic posture and positions
Slide 12: Supplemental Slides
Supplemental Slides
Slide 13: Xerox Today
Xerox Today Delivering on commitments Revenue and operating margin1 ($B) Revenue Operating margin Generating strong and consistent cash flow 9.6% 10.0% 9.0% 8.4% through a challenging environment 7.4% $17.2 $17.6 Investing in growth and winning in the $15.7 $15.9 $16.0 marketplace 2005 2006 2007 200
Slide 14: ACS Diverse Service Offerings
ACS Diverse Service Offerings Commercial Solutions (~60% Revenue) Government Solutions (~40% Revenue) Commercial ITO 21% Transactional BPO 19% Government Solutions 28% Transportation Solutions 12% Information Technology Outsourcing Communications & Consumer Goods State & Local Transportation Solutio
Slide 15: A Powerful Combination
A Powerful Combination Xerox ACS Combined $132B Document Technology Market $150B BPO Market and $250B ITO Market $500B+ Addressable Market Market • Leader: Hardware Revenue and MPS • BPO Leader, ITO significant competence • Leader in key segments • Enhanced capabilities 50% of Revenues generated fro
Slide 16: Non-GAAP Measures
Non-GAAP Measures
Slide 17: Non-GAAP Financial Measures
Non-GAAP Financial Measures “Adjusted EPS": To better understand the trends in our business and the impact of this transaction post-acquisition, we believe it will be necessary to adjust diluted earnings per share to exclude the effects of the following items: (1) the amortization of purchased intan
Slide 18: Pro Forma Adjusted Free Cash Flow Reconciliation
Pro Forma Adjusted Free Cash Flow Reconciliation Year Ended June 30, 2009 Pro-Forma Free Cash Flow and Adjusted Free Cash Flow Xerox ACS Combined (in millions) Operating Cash Flow $ 1,076 $ 877 $ 1,953 Capital expenditures (155) (320) (475) Internal use software (125) - (125) Additions to other inta
Slide 19: Xerox Adjusted Free Cash Flow Reconciliation
Xerox Adjusted Free Cash Flow Reconciliation Year Ended December 31, Xerox Adjusted Free Cash Flow 2005 2006 2007 2008 (in millions) Operating Cash Flow - As Reported $ 1,420 $ 1,617 $ 1,871 $ 939 Payments for securities litigation, net - - - 615 Operating Cash Flow - As Adjusted 1,420 1,617 1,871 1
Slide 20: ACS Adjusted Free Cash Flow Reconciliation
ACS Adjusted Free Cash Flow Reconciliation Year Ended June 30, ACS Free Cash Flow 2006 2007 2008 2009 (in millions) Operating Cash Flow $ 639 $ 738 $ 827 $ 877 Capital expenditures (395) (317) (268) (320) Additions to other intangible assets (36) (43) (41) (43) Free Cash Flow $ 208 $ 378 $ 518 $ 514
Slide 21: Xerox Adjusted Operating Margin Reconciliation
Xerox Adjusted Operating Margin Reconciliation Year Ended December 31, Year Ended Xerox Adjusted Operating Margin 2005 2006 2007 2008 June 30, 2009 (in millions) Income before Income Taxes and Equity Income (Pre-Tax Income) $ 830 $ 808 $ 1,438 $ (114) $ 416 Restructuring and asset impairment charges
Slide 22: ACS Adjusted Operating Margin Reconciliation
ACS Adjusted Operating Margin Reconciliation Year Ended June 30, ACS Adjusted Operating Margin 2006 2007 (in millions) Operating Income - As Reported $ 617 $ 537 Gain on sale of business (33) - Software impairment charge - 76 Operating Income - As Adjusted $ 584 $ 613 Total Revenues $ 5,354 $ 5,772
Slide 23: Rule 425 Statement
Rule 425 Statement The proposed merger transaction involving Xerox and ACS will be submitted to the respective stockholders of Xerox and ACS for their consideration. In connection with the proposed merger, Xerox will file with the SEC a registration statement on Form S-4 that will include a joint pr
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