Xerox tries a poker game by announcing the purchase of its historic competitor Lexmark for 1.5 billion dollars. This acquisition marks a strategic turning point for the American printing giant, which is desperately seeking to reinvent itself in an increasingly digital world.
The story could almost make you smile. Xerox, which attempted a $35 billion hostile takeover bid for HP in 2020 before the pandemic derailed its plans, today finds itself with a market valuation of barely $1 billion. A dizzying decline which perfectly illustrates the challenges facing the traditional printing industry.
The acquisition of Lexmarkbased in Lexington, Kentucky, appears to be a lifeline for Xerox. This merger will create a juggernaut serving more than 200,000 customers in 170 countries, relying on a network of 125 manufacturing and distribution facilities spread across 16 countries. The new entity will position itself among the top five global players in the entry-level, mid-range and production printing segments.
Marriage of convenience
Steve Bandrowczak, CEO of Xerox, makes no secret of his ambitions. “By combining our capabilities, we will be better positioned to generate long-term profitable growth.” he congratulates himself. The company plans to achieve over $200 million in cost synergies within two years following the completion of the transaction.
Xerox has a sense of timing. Lexmark, currently owned by a consortium of Chinese investors (Ninestar Corporation, PAG Asia Capital and Shanghai Shouda Investment Center), was acquired eight years ago for $3.6 billion. Its resale at half price reflects the difficulties of the sector.
The transaction will notably enable Xerox to strengthen its presence in the growing A4 color printing market and expand its geographic presence, particularly in the Asia-Pacific region. The combination of Lexmark solutions with Xerox ConnectKey technology also promises to significantly enrich the group’s digital services offering.
The price of survival
To finance this acquisition, Xerox will have to tighten its belt. The group has already announced a reduction in its annual dividend, which will go from 1 dollar to 50 cents per share from the first quarter of 2025. A difficult pill to swallow for shareholders, but necessary to reduce the group’s debt.
The objective is clear: to increase the gross debt ratio from 6.0 to around 5.4 before synergies, then to 4.4 after achieving the planned savings. In the medium term, Xerox even hopes to bring this ratio below 3.0.
The completion of the operation is planned for the second half of 2025subject to customary regulatory approvals and the green light from Ninestar shareholders.
- Xerox buys Lexmark for $1.5 billion, creating a global printing giant operating in 170 countries
- Company plans $200 million in cost synergies, cuts dividend in half
- The transaction is expected to close in the second half of 2025, subject to regulatory approvals
