Xerox and Icahn Announce Company Will Split Into Two

Billionaire investor Carl Icahn is expected to get three seats on the Xerox services company board, the Journal reported.

The split will create an $11 billion document technology company and a $7 billion business process outsourcing company, Xerox said Friday in a statement.

As part of an agreement with Icahn, three of his representatives will serve on the board of the services company after it has been spun off, the person briefed on the decision said.

Xerox shares have fallen 13 percent since the beginning of the year, while the Standard & Poor’s 500 index has dropped slightly more than 7 percent.

Additionally, Xerox implemented a three-year strategic transformation program to achieve a cumulative savings of $2.4 billion across all segments. Profit, excluding some items, was 32 USA cents a share, beating the average analyst estimate of 28 cents.

Xerox will separate its services division from its document technology, which made $11 billion in revenue previous year. The document technology company will handle document management and document outsourcing, while the business process outsourcing business will help companies with automating and simplifying business processes.

Total revenues were $4.65 billion in the quarter, down 8 percent or 5 percent in constant currency year-over-year. He wrote earlier this month that Xerox in 2015 had “continued to suffer” from declines in legacy information technology business.

The WSJ noted that the separation will unravel Burns’s “signature deal”, the 2010 purchase of Affiliated Computer Services for about $6 billion, which pushed Xerox deeper into providing bill processing, managing call centers and other back-office services to government agencies and corporations. It expects to use more than 50 percent of its free cash flow for share repurchases and dividends.

Pending regulatory approval, the split is expected to be completed by the end of the year.

Speaking on the issue of the two new entities possibly attracting potential buyers, Burns confirmed that Xerox Corp’s (XRX.N) board members and top executives were prepared to discuss with anyone if they are interested.

Shares of Xerox Corp (NYSE:XRX) opened at 9.23 on Friday.

While eBay Inc split its payments business Paypal Holdings Inc, Manitowoc Co Inc separated its crane manufacturing business from its food service business. Fourth quarter operating margin of 9.2 percent was down 1.2 percentage points. The companyÂ’s Services segment offers various business process outsourcing services, such as customer care, transaction processing, human resources, communication and marketing, and consulting and analytics services, as well as finance, accounting, and procurement services.

“Looking forward, we will continue to take actions that deliver value for shareholders and clients”.