More dirty laundry on Xerox/ACS deal…

We’ve been skeptical about the deal between Xerox and ACS ever since it was announced on Sept. 28. As we wrote over on Research Edge last month, after the S-4 was filed, this seemed like an awfully good deal for ACS Chairman Darwin Deason and a few other top executives at ACS “and nothing all that special for anyone else”. Xerox stock has dropped over 12% since the deal was announced.

And then yesterday, Xerox filed an amended S-4 which included some additional juicy details — and, as far as we’re concerned more evidence — on why this one still stinks.

So what was new in those 170-plus pages? Some interesting new details about Deason’s severance, which Xerox now estimates will cost the company $41.3 million plus another $17.4 million to cover the tax gross-up. Remember: this is on top of the roughly $800 million that Deason is set to receive from his holdings of ACS stock, including the Class B shares. We also liked this new addition to yesterday’s filing:

The $62 per share price for the ACS common stock was a substantially higher price than Xerox would have offered had they not received information regarding conversations between Blackstone and each of Citi and Mr. Deason.

That ought to give the half-dozen or so law firms that are have filed lawsuits over the transaction, something to chew about over Thanksgiving weekend. We also liked the chart on pg. 99 that justified the premium being paid to Deason by comparing it with several other deals where a “high-vote shareholder” had voting power in excess of 30%. That list of seven companies — six of which took place in 2004 or earlier — don’t exactly include a list of deals to emulate. Among those on the list used to justify the Xerox/ACS deal was the 1996 deal between Silver King and Home Shopping Network and the 2000 deal between Clear Channel and SFX Entertainment.

Quite frankly, we’re surprised that Xerox dumped this 177-page monster yesterday, instead of waiting for today, or — even better Friday — when the SEC is open but most people are too occupied with turkey leftovers, football and Black Friday shopping specials.

We’ll be back on Monday. Enjoy your Thanksgiving!


Next Thursday (December 3), I’ll be doing a special webcast sponsored by ShareTraining designed to teach people some of the tricks I use when I dig into filings. The course will last 90 minutes and will include time for questions. The cost is $295 and you can register for the class by clicking here.