Xerox Disrupted

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In 2012, Xerox ’s chief executive, Ursula M. Burns said that if the company continued to only make copiers for the next several decades, it would not exist. To ensure the century-old company’s survival, she diversified the business with services, or helping businesses simplify their processes with technology, through…

In 2012, Xerox’s chief executive, Ursula M. Burns said that if the company continued to only make copiers for the next several decades, it would not exist. To ensure the century-old company’s survival, she diversified the business with services, or helping businesses simplify their processes with technology, through billions in acquisitions.

A little more than three years later, amid the rise of activist investors who are pushing older companies to slice and dice themselves to drive value, Xerox has decided to spin off its services business.

The so-called Business Process Outsourcing company will become its own publicly traded company by the end of the year, according to a statement by Xerox on Friday. The remaining Xerox, which it is calling Document Technology, will include the hardware that made its name synonymous with photocopying decades ago, like scanners, printers and copy machines.

The leadership and actual names of the two companies will be determined later.

The split is the result of the “comprehensive review of structural options” that Ms. Burns announced in October, although at that time, she said she was in favor of keeping the company together.

A month later, Carl C. Icahn started amassing a stake in Xerox that reached 8.13 percent by December. The activist investor believed Xerox’s shares were undervalued and pursued discussions with management to improve operational performance and other alternatives that he thought could improve the company’s worth for shareholders..

As part of a settlement with Mr. Icahn, the billionaire will get to choose three directors for the Business Process Outsourcing company, while Xerox gets six. Mr. Icahn will choose a person to advise on the chief executive search process for that business, according to a separate statement Friday on their settlement.

Ms. Burns said in an interview on CNBC on Friday morning that her role at either company had yet to be determined, without saying whether she would stay.

“Today Xerox is taking further affirmative steps to drive shareholder value by announcing it will separate into two strong, independent, publicly traded companies,” Ms. Burns said in a statement. “These two companies will be well positioned to lead in their respective rapidly evolving markets and capitalize on the opportunities that now exist to expand margins and increase market share.”

A large part of the Business Process Outsourcing division would be Affiliated Computer Services, which Xerox purchased for $6.4 billion in 2010. As a stand-alone company, Business Process Outsourcing would have had about $7 billion in revenue in 2015. Document Technology would have had about $11 billion in revenue.

Xerox also announced that it would aim to save $2.4 billion as part of a “strategic transformation program” across all of its segments over the next three years, $700 million of which it expected to be achieved in 2016.

Based in Norwalk, Conn., Xerox has more than 140,000 employees worldwide.

The transaction is expected to be tax-free to Xerox shareholders for federal income tax purposes.

Lazard and Goldman Sachs provided financial advice to Xerox, while Centerview Partners advised the board. Cravath, Swaine & Moore served as the legal adviser to Xerox and Paul, Weiss, Rifkind, Wharton & Garrison advised the board.


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