Xerox Holdings Corporation has announced it has agreed to acquire Lexmark International, Inc., from Ninestar Corporation, PAG Asia Capital, and Shanghai Shouda Investment Centre in a deal valued at USD$1.5 billion, inclusive of assumed liabilities.
Xerox says this acquisition will strengthen its core print portfolio and build a broader global (inc. APAC) print services business better suited to meet the evolving needs of clients in the hybrid workplace.
Steve Bandrowczak, chief executive officer at Xerox says: “Our acquisition of Lexmark will bring together two industry-leading 
Xerox CEO Steve Bandrowczakcompanies with shared values, complementary strengths, and a deep commitment to advancing the print industry to create one stronger organization. By combining our capabilities, we will be better positioned to drive long-term profitable growth and serve our clients, furthering our Reinvention.”
Lexmark is already a valuable partner and supplier to Xerox and is a leading provider of innovative imaging solutions and technologies including a line of printers and multifunction printers. By combining Lexmark’s solutions with Xerox ConnectKey technology and advanced Print and Digital Services, the acquisition is aimed to create a superior offering portfolio and underscores Xerox commitment to increasing value for clients and partners.
The transaction will also strengthen the ability of Xerox to serve clients in the large, growing A4 color market and diversify its distribution and geographic presence, including the APAC region. The new organization will serve more than 200,000 clients in 170 countries with 125 manufacturing and distribution facilities in 16 countries. Combined, Lexmark and Xerox have a top five global share in each of the entry, mid and production print markets and are key players in the large, stable managed print services market.
Allen Waugerman, Lexmark president and chief executive officer says: “Lexmark has a proud history of serving our customers with world-class technology, solutions and services, and we are excited to join Xerox and expand our reach with shared talent and a stronger portfolio of offerings. Lexmark and Xerox are two great companies that together will be even greater.”
To this, Bandrowczak adds: “Our shared values and vision are expected to streamline operations and drive efficiencies, taking the best of both companies to make it easier to do business with Xerox."
Transaction Rationale
- Strategic fit: Xerox and Lexmark have complementary sets of operations, offering strengths and end-market exposures. Combined, the companies form a vertically integrated manufacturer, distributor and provider of print equipment and MPS, covering all geographies and client types with a well-rounded portfolio of print and print services offerings.
- Growth opportunities: Lexmark is a leader in the large, growing A4 color print and supplies market and has an opportunity to expand its OEM platform within the A3 equipment category. Once combined, Xerox expects to have a more comprehensive portfolio of products to enhance its offerings and reinforce its value proposition to clients, enabling growth across the portfolio of equipment and MPS, as well as incremental opportunities to increase penetration of its advanced Digital Services and IT Solutions.
- Financial benefits: The transaction is expected to be immediately accretive to earnings per share and free cash flow. Xerox expects this transaction to accelerate the realization of its Reinvention financial targets of revenue stabilization and double-digit adjusted operating income through an improved competitive position and exposure to faster-growing segments within print, as well as more than $200 million of identified cost synergies to be realized within two years of transaction close.
- Improved balance sheet: The transaction will immediately reduce Xerox pro forma gross debt leverage ratio, from 6.0x as of Sept. 30th 2024, to approximately 5.4x before synergies. Pro forma gross debt leverage will be reduced to approximately 4.4x with the benefit of $200 million of cost synergies. With improved free cash flow and a priority of repaying debt, Xerox expects to reduce its gross debt leverage ratio to below 3.0x over the medium term.
Transaction Detail
Under the terms of the agreement, Xerox will acquire Lexmark for total consideration of USD$1.5 billion, inclusive of net debt and other assumed liabilities. Xerox expects to finance the acquisition with a combination of cash on hand and committed debt financing.
In conjunction with this financing, the Xerox Board of Directors approved a change in the dividend policy to reduce the Xerox annual dividend from USD$1 per share to 50 cents per share starting with the dividend expected to be declared in the first quarter of 2025. This lowered dividend payment provides incremental capacity to reduce debt while continuing to reward shareholders with an above-market yield.
The Xerox Board of Directors has unanimously approved the transaction. The transaction is subject to regulatory approvals, approval of Ninestar’s shareholders, and other customary closing conditions. It is expected to close in the second half of 2025. Until then, both Xerox and Lexmark will maintain their current operations and operate independently.
Footnote by Editor Andy McCourt
This merger is bigger than it seems at first sight. The significance is that Lexmark will bring with it, at least in ANZ and APAC, a strong channel and dealer network - something Xerox has not had since its acrimonious split from Fuji Xerox and the end of the Fujifilm joint venture. Lexmark is the old pre-1997 IBM printer and keyboard business which at one stage (last century), was manufacturing printers and computers within Australia, at Wangaratta.
Could Lexmark serve as the 'Trojan Horse' to get Xerox back into the Oceania/APAC market? We won't know untill 2nd half of 2025 when the deal completes but, who knows what plans are being made ahead of this date?
