Xerox (XRX) announced on Monday that it will acquire Lexmark International in a $1.5 billion deal to bolster its office equipment business. The purchase, which includes Lexmark’s debt, marks a significant step in Xerox’s strategic growth plans and returns Lexmark to U.S. ownership after nearly a decade under Chinese investors. Lexmark is a supplier for Xerox and a provider of imaging solutions and printers.
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The acquisition is expected to close in the second half of next year.
Why Did Xerox Acquire Lexmark?
Lexmark was originally spun off from IBM (IBM) in 1991 and was sold to a group of Chinese firms in a $3.6 billion deal in 2016. These Chinese investors included Ninestar Corp, PAG Asia Capital, and Shanghai Shouda Investment Centre. With this acquisition, Xerox intends to build on Lexmark’s global presence and serve over 200,000 clients across 170 countries. Additionally, the company stated that the combined entity will have “a top five global share in each of the entry, mid and production print markets.”
This acquisition will enhance Xerox’s ability to compete in the rapidly expanding A4 printer and copier market. These devices are increasingly favored in homes and offices. Additionally, the deal will expand the company’s footprint in the Asia-Pacific region, further diversifying its customer base.
How Will XRX Fund the Acquisition?
Xerox plans to fund the acquisition using a combination of cash reserves and debt financing. Additionally, in relation to the financing of this deal, the company’s Board of Directors announced a change in its dividend policy with a reduction in its annual dividend from $1 per share to $0.50, starting in the first quarter of 2025.
Is XRX a Good Stock to Buy?
Analysts are bearish about XRX stock, with a Moderate Sell consensus rating based on one Hold and three Sells. Over the past year, XRX has declined by more than 45%, and the average XRX price target of $14 implies an upside potential of 55.9% from current levels.
