from DealZone:
Xerox-ACS: the backstory
Xerox, which said early Monday morning it will buy Affiliated Computer Services for $6.4 billion, has had its eye on the IT services company for at least two years, but talks only began toward the end of the first quarter of 2009, several people familiar with the matter told Dealzone. Blackstone, which advised Xerox, worked with the company on this over the past 18 months, in addition to making the introductions earlier this year, according to one source.
Talks grew hot and heavy over the summer, especially as the credit market conditions improved, a second source said. Xerox has committed financing of $3 billion for this deal, which is being arranged by JPMorgan, so the deal only began to look like a real possibility once the financing side was sorted out.
ACS, which competes with other technology services providers such as Computer Sciences Corp and Accenture, is an attractive company because of its recurring revenue business model. It's been an especially alluring target for private equity buyers, with Cerberus having offered to buy it for $62 a share in 2007. Cerberus withdrew its offer citing the credit crunch and ACS management's refusal to engage with them. TPG was also interested in ACS about five years ago, the second source added.
Buyout firms didn't lose the opportunity to sniff around at ACS this time around either, the sources said, although it's not clear if the ACS management asked its bankers to run a formal sale auction.
"Every PE firm in the world that could raise the debt was kicking the tires on this one because of the cash," said the third source.
So after doing the M&A dance for months, why did the companies rush to announce the deal on Yom Kippur, the Jewish holiday? Apparently, word got around on Sunday that Xerox was preparing a significant announcement, and some reporters were tipped off about it, two of the sources told Dealzone. But the board only ended up meeting late at night to approve the deal, and so it was considered "safe" to hold on to the announcement overnight, but not through all of Monday!
Update: From my colleague Franklin Paul, who said Xerox CEO Ursula Burns apologized to the audience on the ACS deal call "for our need to do this announcement on Yom Kippur." "It was certainly not our intention," Burns said, but they wanted to seal the deal before it began leaking. Certainly they did, given that Xerox has coveted ACS for a long time and probably would have hated to see the deal botched by rumors before the two sides signed on the dotted line.
Read The Washington Post’s buyout memo
The Washington Post is offering new buyouts to help the money-losing paper cut costs as it pursues a plan to become profitable again. You can read our story about it, along with an interview with Publisher Katharine Weymouth. Meanwhile, here are some excerpts from her memo to Post employees:
I need not tell you that our industry is undergoing a seismic shift as readers face an array of media choices and our traditional advertising and circulation bases decline. The good news is that the appetite for news is as robust as ever. Thanks to our presence on the Internet and on mobile phones and other devices, our audience includes more readers now than we have ever had. But while online revenues have been growing, they have not yet grown fast enough to offset the declines we are seeing in print revenues. As we move forward, our path is pretty straightforward: we will have to reduce our cost structure…
Below are some of the specifics on the VRIP that we plan to offer certain exempt employees in the next few weeks. We also plan to offer a similar VRIP to certain Guild-covered employees. Post representatives will be discussing the proposed VRIP with the Guild in a few weeks, consistent with the terms of the labor contract. While this VRIP is similar in some ways to the programs we have offered in the past, it will not be as generous as some of those prior buyouts.
Eligibility: To participate, exempt employees must be at least age 50, and have at least 5 years of service under The Post’s retirement plans, as of December 31, 2009. They must be full-time, or part-time averaging at least 22.5 hours a week, and must be working in one of the departments or positions specifically listed in the VRIP.
Program Specifics: Eligible exempt employees who retire under the VRIP will receive:
• A lump sum payment of up to one and a half times the employee’s salary based on years of service.
The VRIP will also offer significant enhancements to employees’ retirement benefits on a one-time basis:
Baltimore Sun feels Tribune cost cuts
Suburban bureau reporters at The Sun in Baltimore, Maryland, are about to learn the true meaning of the word “mobile.” The Tribune Co-owned paper is shutting down the last of its three suburban bureaus and bringing their reporters back to the main newsroom in Baltimore proper, sources told MediaFile on Tuesday.
The paper will outfit them with laptops and Blackberries and will send them back into the field to do their job by car or however else they can get to the story. It is part of wider changes going on at Tribune Co, which is in bankruptcy proceedings because of some $13 billion in debt that it has been unable to deal with because of the increasingly grim advertising sales plaguing newspapers.
Tribune’s chief executive, real estate magnate Sam Zell, was unhappy with the amount of empty space that The Sun has in downtown Baltimore, especially when considering all the space that the paper was renting in the suburbs, one of our sources says. The three bureaus that The Sun will shut down are in Anne Arundel, Baltimore and Howard counties. The Sun’s bureaus in Carroll and Harford counties already closed in the past year. It’s not clear if the two are related, but the three bureaus shutting down now are traditional turf war zones with The Washington Post, which recently said it will begin cooperating with The Sun on some coverage in the counties.
Shutting down bureaus must feel a little like a retreat. On the other hand, it must be nice to not be chained to a desk all day long, as we suspect more mobile journalists — or “MoJos” — are discovering..
The news was delivered in an off-record employee meeting, which also included the news that more buyouts and layoffs are on the way, likely sooner rather than later.
Speaking of personnel issues, Tribune Co Chief Administration Officer Gerald (Gerry) Spector had some bad news for employees: Salary freeze for non-union employees are coming this year. And if you’re in the union? Management will work it out in collective bargaining agreements. This is similar to what News Corp did at Dow Jones and The Wall Street Journal. It also comes on top of mandatory furloughs at Gannett and other publishers, not to mention a variety of other ways to stay afloat in increasingly stormy seas.
Here’s Spector’s memo, released Monday and obtained through a source:
Watch Gannett layoffs in slow motion
It’s layoff week at Gannett — even the second N and T might be redundant.
The largest U.S. newspaper publisher and owner of USA Today, the nation’s biggest-selling daily paper, is slashing payroll just in time for the holidays. We read about layoffs everywhere these days, but if you want to see the slow-motion car crash version of how Gannett is doing it, look to Gannett Blog, run by former company reporter Jim Hopkins.
With no newspaper job to keep him busy, Hopkins chronicles nearly every event that he hears about Gannett. That includes a dose of rumor, but much of what he reports is more right than wrong.
Here is one of his latest reports:
Gannett launched what is likely the biggest mass layoff in newspaper industry history yesterday, slashing 655 jobs by early this morning, in an increasingly desperate bid to return the troubled 102-year-old publisher to prosperity. The final tally could run into the thousands.
Many more layoffs are expected today and tomorrow across the 85-daily community newspaper division, plus USA Today and the Detroit Free Press. As of 1:25 a.m. ET, only 17 papers had been accounted for, based on published accounts and Gannett Blog reader reports.
(My Gannett newsroom sources are telling me the same story.)
How sad. Even sadder is that employees have to learn of it from outside sources. The company usually notifies shareholders first before releasing such news. Not this time!
