Xerox (XRX) announced an agreement to sell its Information Technology Outsourcing (ITO) business to Atos for USD 1.05 billion prior to closing adjustments, with additional consideration of $50 million subject to the condition of certain assets at closing. The transaction is subject to customary closing conditions and regulatory approval and is expected to close in the first half of 2015.
The transaction will enable new levels of strategic collaboration in client situations and innovative solutions leveraging Atos’ world-class ITO capabilities and highlighting Xerox’s Business Process Outsourcing (BPO) and Document Outsourcing expertise.
Xerox’s ITO business includes approximately 9,800 ITO employees in 45 countries, with 4,500 in the U.S. and more than 3,800 in global delivery countries. The Xerox ITO leadership team will join Atos. Xerox’s existing ITO clients will gain access to Atos’ global IT services capabilities and a broad range of services.
Also under the terms of this transaction, Atos will provide IT services to Xerox.
As a result of the pending sale of the ITO business, Xerox expects to report this business as a discontinued operation. For full-year 2014, this represents an estimated net USD 1.3 billion in third-party Services segment revenue and an estimated USD 115 million in Services segment profit. With this change, Xerox now expects full-year 2014 GAAP earnings per share from continuing operations of USD 0.87 – USD 0.89 and full-year 2014 adjusted earnings per share of USD 1.04 – USD 1.06. For Q4 2014, Xerox expects GAAP earnings per share from continuing operations of USD 0.24 – USD 0.26 and adjusted earnings per share of USD 0.28 – USD 0.30.
Additionally, Xerox expects initial net after-tax proceeds from the transaction of approximately $850 million and plans to increase its 2015 capital allocation for repurchasing shares to approximately USD 1 billion and up to $900 million for acquisitions.
To reflect the pending sale of the ITO business and its impacts in 2015, including the timing of use of proceeds, Xerox is updating guidance for full-year 2015 GAAP earnings per share from continuing operations to USD 0.88 – USD 0.94 and full-year 2015 adjusted earnings per share to USD 1.05 – USD 1.11. Xerox does not anticipate earnings per share dilution beyond 2015.