Printer and copier company Xerox Corp. (XRX) said Monday it has resolved a lawsuit brought on by shareholders of takeover target Affiliated Computer Services Inc. (ACS).
Xerox and ACS said that the plaintiffs have withdrawn their motion for a temporary or permanent injunction of the deal.
Further, the parties agreed in a Dallas County court in Texas that Xerox will not enforce requirements in its voting agreement with ACS founder and chairman Darwin Deason in the event ACS's board of directors receives a superior offer and withdraws its recommendation for the Xerox buyout.
Xerox's voting agreement with Deason requires him to vote any of his shares of ACS common stock in favor of the acquisition by the company. Deason controls a 43.6% voting interest in ACS.
Xerox also said it will not enforce any requirements of the merger deal that compel ACS to hold that company's stockholders' meeting to vote on the Xerox transaction. Previously, Xerox not only had 21.8% ACS votes locked up, but it could also force ACS to hold the meeting for the shareholder vote.
Further, Xerox said that if requested by ACS, it will terminate the merger agreement in accordance with its terms. If ACS receives and accepts a higher bid, it will owe Xerox a $194 million breakup fee.
The settlement follows an earlier agreement in the Texas lawsuit to effectively amend the merger agreement to permit ACS to provide confidential information to a third-party bidder. The two agreements are now being seen as opening the doors for a third-party bidder to step in.
Xerox, however, noted that a class action by ACS stockholders related to the acquisition remains pending in the Delaware Court of Chancery.
In late September, Norwalk, Connecticut-based Xerox said it signed an agreement to acquire business process outsourcing firm ACS in a cash and stock deal valued at $63.11 per share, or $6.4 billion, as part of its efforts to accelerate its transformation from a product company into a service provider.
The acquisition, which would create a $22 billion global enterprise for document technology and business process management, is expected to close in the first quarter of 2010, subject to customary closing conditions including regulatory and shareholder approvals.
The deal, expected to accelerate Xerox's growth in the $150 billion business process outsourcing, or BPO market, was approved by both companies' boards of directors and the ACS special committee.
Under the terms of the deal, shareholders of ACS will receive a total of $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. The total consideration is based on Xerox's closing price on September 25 of $9.02. In addition, Xerox will assume ACS's debt of $2 billion and issue $300 million of convertible preferred stock to ACS's Class B shareholders.
Xerox took a step closer to acquiring ACS after the company said in mid-November that Hart-Scott-Rodino review period for the acquisition has expired. The expiration of the HSR waiting period satisfied one of the conditions to the closing of the acquisition.
In Monday's regular trading session, XRX is trading at $7.94, up $0.11 or 1.40% on a volume of 1.21 million shares. In the past 52 weeks, the stock has been trading in a range of $4.12-$9.75.
ACS is currently trading at $55.94, up $0.64 or 1.16% on a volume of 0.25 million shares. The stock has been trading in a range of $34.84-$56.23 in the past 52 weeks.
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