(XRX – Get Report) stock is down by 0.65% to $9.15 in after-hours trading on Thursday, after a report said the company is planning to split in two.
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A number of equities analysts recently issued reports on XRX shares.
Discussions between Icahn and Xerox management about the split have been characterized as amicable, noted the Journal.
The document technology company, which will make printers and copiers, will have annual revenue of Dollars 11 billion, while the business process outsourcing company will have USD 7 billion in revenue.
The decision comes from the company’s review of its portfolio and capital allocation options, which was initially announced in October. The activist investor will also select someone to “observe and advise” the search committee for the next chief executive of the new company.
By the end of this year, after more than a century in business, Xerox as a single large corporation will no longer exist.
Mr. Icahn has had several successful engagements with companies in the midst of breaking up in recent years, including at eBay Inc., Manitowoc Co. and Gannett Co. The company’s revenue was down -7.6% compared to the same quarter a year ago.
Icahn disclosed a 7.1 percent stake in the printer and copier maker in November and called its shares “undervalued”. However, the biggest question raised by Xerox’s move is how the document technology side of the business will now evolve going forward, she noted.
Xerox announced as well that it is aiming to save more than $2.4 billion in its strategic transformation programs through all its segments over the upcoming three years.
As per the agreement, when the separation is complete, the BPO company will have certain best-in-class corporate governance provisions and a Board of Directors composed of nine members: six directors selected by Xerox (two of whom may come from the current Xerox Board of Directors) and three directors selected by Icahn.
Xerox reported full-year revenue of US$18 billion. The split would follow a similar move by rival Hewlett-Packard Co. last fall. Burns has been CEO since July 2009 and has made tens of millions of dollars. The ACS acquisition was a way to shift the company’s focus from document handling to a range of services for business and government customers. She added that her future role in either company has yet to be determined.
Today, Xerox’s BPO operations holds a No. 2 market share, holding more than half of the electronic highway toll collection market and with all of the top 20 US health insurance carriers in its customer base.
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Icahn, who says he owns 42 million shares of AIG, has not yet publicly responded to the company’s new strategy, and he could still start a proxy battle.
