Xerox Plans Split; Carl Icahn to Get Board Seats

In a separate press release, Xerox said that its board has unanimously approved management’s plan to separate Xerox into two independent publicly- traded companies.

The company split will help Xerox make needed cost cuts, delivering $2.4 billion in savings over the next three years; $700 million is expected to be saved this year alone.

Xerox Corp. (NYSE: XRX) announced plans Friday to split itself into two companies and give three board seats to activist investor Carl Icahn, reversing an effort by the century-old company to marry business services with its copiers and printers.

“These two companies will be well positioned to lead in their respective rapidly evolving markets and capitalise on the opportunities that now exist to expand margins and increase market share”. The spinoff will largely consist of Affiliated Computer Services, the business-outsourcing company that Xerox bought in 2010 for US$6.4 billion, The New York Times reported late Thursday, quoting a person briefed on the decision. A month later in November, Icahn announced that he had acquired a 8.1 per cent stake in Xerox – making him the second-largest shareholder – and labelled shares of the company as “undervalued”.

Under the newly announced division, Icahn will get to name three of the nine directors on the board of the business processes company, The Associated Press reports. Document Technology revenue was $1.9 billion, down 13 percent or 10 percent in constant currency.

Last October, Xerox said it will review its business portfolio and capital allocation options after reporting its financial results for the third quarter.

“I applaud and respect Ursula Burns for doing what she believes shareholders want”, Icahn said via his Twitter account. The firm earned $4.65 billion during the quarter, compared to analysts’ expectations of $4.73 billion.

“A core tenet of the strategic transformation we are embarking on today is changing and improving the way we operationalize our businesses”, Burns said. Her theory was that Xerox needed to diversify beyond its copier and related hardware businesses. They expect sales to be $17.9 billion, down 2 percent from sales of $19.5 billion in 2014.

Xerox on Friday said it would split into a document technology company and a business services company in a move to become more flexible and responsive in each of those businesses.

Xerox Corporation will split into two companies, one focused on hardware and the other on services. The document technology company will be made up of the other 40,000 including most of 6,500 Xerox employees in the Rochester area.

Finally, Goldman Sachs began coverage on Xerox Corp in a research report on Tuesday, December 1st.