Xerox Offloads IT Outsourcing Business in $1.05 Billion Deal

Xerox (XRX) sold off its IT outsourcing business (ITO) to European conglomerate Atos in a $1.05 billion acquisition deal that officials said will immediately triple the French digital services company’s U.S. business.

The boards of both companies have approved the deal, which is expected to close sometime in the first six months of 2015 pending regulatory approval and consultation with employee representative groups. The parties said the value of certain, unidentified assets at closing could add another $50 million to the purchase price.

Xerox, which said its IT outsourcing business will generate about $1.3 billion in revenue and $115 million in profit on an annualized basis for 2014, will report the sale as a discontinued operation. The company said the sale will net it about about $850 million, some of which will be slotted for a 2015 $1 billion share buyback initiative and a $900 million acquisitions pool.

As part of the deal, Atos will gain Xerox’s ITO clients and become a primary IT service provider to Xerox. The Xerox ITO executive team will transition to Atos as will the 9,800 employees that work for the unit, about half of which are employed in the U.S.

Xerox said the sale will enable it to concentrate on its business process outsourcing and document outsourcing operations within its services unit.

“This transaction is another step in our ongoing portfolio management strategy and increases our focus on those areas where we can deliver the most value and expertise to our clients,” said Ursula Burns, Xerox chairman and chief executive.

The two companies have worked together for a number of years, with Xerox supplying Atos with managed print, human resource and financial services and contracting back for ITO services in Europe.

“Atos is a company with whom we’ve had a long relationship in several capacities,” said Burns. “Selling the ITO business to Atos gives our clients around the globe an expanded, world-class suite of IT capabilities that complement Xerox’s industry leading BPO and document outsourcing solutions.”

Atos said the deal expands its geographic reach and services capabilities in cloud, big data, security and high performance computing, particularly in the U.S. and Europe.

“Increasing our position in the U.S. is a major step in the completion of our three-year strategic plan and responds to a strong demand from our global customers,” said Thierry Breton, Atos chairman and chief executive. “This transaction will allow us to strengthen our footprint in the U.S. market, which is an early adopter of high growth innovative technologies, and to access a pool of talented and highly skilled technologists,” he said.

In its most recent Q3 2014, Atos, which provides managed services, consulting and systems integration, data analytics and cyber security services, posted sales of 2.2 million euros. The company employs some 85,000 people throughout Europe, the Americas and EMEA. Atos is fresh off recent acquisitions of server and supercomputer maker Bull for 620 million euros and Swiss IT consulting firm Cambridge Technology.