Global IT services firm Atos has significantly expanded its US footprint with the acquisition of Xerox’s IT Outsourcing (ITO) business. The deal, which costs Atos roughly €880 million, will see 9,800 employees join its team in 45 countries.
According to Thierry Breton, CEO of Atos and a former French Finance Minister, the acquisition is in line with its strategy to become a top 5 global IT Services player. The French-origin firm to date has a strong presence in Europe and Asia, yet lacked a market leading footprint in the US. Following the deal, Atos’ global revenues will rise to approximately €10 billion, while its US revenue will almost triple from €0.6 billion to €1.7 billion. “Increasing our position in the US is a major step in the completion of our three year strategic plan,” says Breton.
Xerox ITO employs approximately 9,800 employees in 45 countries of which 4,500 are located in the US and more than 3,800 are in global delivery countries such as India, the Philippines, and Mexico. The €880 million purchase sum, which is being paid entirely in cash, is based on three components: an initial fee of €760 million, €80 million to be paid once certain tax benefits are incurred and €40 million once the deal has been closed.
For printer specialist Xerox, the sale follows its recent strategic decision to focus on its core business, printing and office software solutions, and offload slower-growing units. It acquired the unit in 2009 as part of its Affiliated Computer Services takeover, for which it paid €4,4 billion. The other acquired units, which include among others customer care for print services, finance and accounting and other back-office functions, will remain part of Xerox. With the income from the sale, Xerox aims at doing a number of focused acquisitions in its core domain and completing the purchase of a bulk its own shares.
In addition to the transaction, Atos and Xerox have also signed a worldwide strategic collaboration, which consists of three key pillars. Firstly, Atos has been named the global preferred IT-partner for Xerox*, secondly, both firms will team up in joint innovation projects and go to market, and thirdly the roughly 300 clients of Xerox ITO in the US will be able to leverage international IT-support from Atos.
For Atos, it is the second major acquisition this year. In May it bought French IT-services firm Bull for approximately €620 million.
* Roughly $240 million of Xerox ITO’s $1.5 billion of sales comes from Xerox itself.