Xerox Corp (NYSE:XRX) decided to split itself into two independent, publicly-traded companies in a tax free structure. The move was part of its efforts to boost shareholder value. The stock price of the company surged more than 6% to $9.83 per share at the time of this writing around 11:24 AM in New York on Friday.
The Board of Directors of the company unanimously approved the creation of a Document Technology company and Business Process Outsourcing company after completing a comprehensive structural review.
In a statement, Xerox Chairman and CEO Ursula Burns, said, “Today Xerox is taking further affirmative steps to drive shareholder value by announcing it will separate into two strong, independent, publicly traded companies. 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.”
Xerox strategic transformation
According to Xerox, the Document Technology company generated approximately $11 billion in revenue last year will remain a global leader in the industry. It will lead the document management and document outsourcing market with superior technology, solutions and innovations in an increasingly interconnected and digital world.
On the other hand, the Business Process Outsourcing (BPO) company is expected to become an industry leader by leveraging its expertise in managing transaction-intensive processes and applying innovations. Last year, the business generated around $7 billion in revenue. As an independent company, it has flexibility to adapt to the changing needs of clients, refine its portfolio of services and pursue significant growth opportunities.
Xerox believes that the separation will maximize returns for shareholders and align with current market dynamics. The company expects to complete the split by the end of this year.
Additionally, Xerox implemented a three-year strategic transformation program to achieve a cumulative savings of $2.4 billion across all segments. The program includes its ongoing activities and $600 million incremental transformation initiatives.
Carl Icahn to select three Board representatives
In a separate statement, Xerox announced its agreement with Carl Icahn in connection with the governance of the BPO company, which will have nine members of the Board.
Mr. Icahn obtains three Board seats in the BPO company. He would also select a person to observe and advice the Board committee in the search process for a chief executive officer. The activist investor holds 8.13% stake in Xerox.
“We strongly believe that an independent BPO company with fresh, focused leadership and best-in-class corporate governance will greatly enhance shareholder value, and we are proud to be a part of that process,” said Mr. Icahn in a statements.