I've spotted a rare animal in the wild! OK, it's not the elusive yeti, nor that mysterious Loch Ness lassie, or even the legendary albino moose of Dalecarlia. It's the mysterious acquisition of equals!
Document processing veteran Xerox
Add it all up, and you get a total sticker price of $5.6 billion after factoring in the reduced value of Xerox shares being swapped. The buyer's market cap today? $6.6 billion. Xerox may call this an acquisition, but I call it a straight-up merger.
Of course, nothing is final until both Xerox and ACS shareholders approve this deal. Early signs are mildly positive, though: The boards of both companies have approved the deal. However, investors were less certain that the deal offers enough cost savings to cover Xerox’s buyout premium, sending shares of the company plummeting nearly 16% as of this writing.
On the other side of the fence, ACS stock is trading at 93% of the proposed acquisition value. Given the size of the arbitrage opportunity, investors seem to think this deal will close as is, but they have some doubts. Still, I'd be surprised if ACS owners voted this contract down.
So Xerox is pulling a page from the Hewlett-Packard
Marrying hardware with services has become a huge trend in the IT sector, including recent mega-deals like Dell
Those other deals all fell in the IT sector proper, while Xerox and ACS run in the related but separate field of business services. Xerox sees up to $400 million in annual cost savings and immediate profits from the ACS deal, and the combined beast claims a $22 billion enterprise that will have quite a bit of clout in the $150 billion outsourcing market.
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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.