Xerox Holdings Corporation (XRX) announced a strategic acquisition of Lexmark International, a move that sent its stock soaring nearly 7% in intraday trading on Monday. The $1.5 billion deal, which sees Lexmark returning to U.S. ownership from its Chinese investors, aims to fortify Xerox’s position in the evolving landscape of the hybrid workplace.
The acquisition is intended to enhance Xerox’s core print portfolio and expand its managed print services, aligning with the needs of an increasingly flexible workforce. It’s not just about bolstering the domestic market; the purchase is also expected to improve Xerox’s penetration in the burgeoning A4 color market and extend its influence in the Asia-Pacific region, thereby broadening its global footprint.
To finance this acquisition, Xerox is employing a mix of cash reserves and debt financing. However, this strategic move comes at the cost of significantly reducing its shareholder dividends. The company announced that its annual dividend would be halved from $1.00 to $0.50 per share, effective from the first quarter of 2025. This cut, while potentially disappointing for current shareholders, is framed by Xerox’s management as a necessary step to provide “incremental capacity to reduce debt while continuing to reward shareholders with an above-market yield.”
The deal is slated to be finalized in the second half of 2025, suggesting a period of transition and integration for both companies. Despite the positive market reaction to the acquisition news, Xerox’s shares have not had a good year, being down by more than 50%. This downturn reflects broader challenges within the industry, including a decrease in demand for traditional printing solutions amidst the digital transformation.
However, with this acquisition, Xerox is betting on a resurgence by integrating Lexmark’s technologies and market presence. The combination of Lexmark’s innovative imaging solutions with Xerox’s established print and service offerings could lead to a more comprehensive product suite, potentially driving long-term profitable growth. This move might also signal to the market Xerox’s commitment to adapting to new work trends, where flexibility and efficient, high-quality printing solutions remain in demand, even as digital alternatives continue to grow.
Price Action: As of the last check, Xerox Holdings Corp’s (NYSE: XRX) stock was trading at $8.96, up 6.73% for the day. The stock has fluctuated between a daily low of $8.57 and a daily high of $9.34. In the past year, the 52-week low for Xerox stock has been $8.02, while the 52-week high was $19.78.
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