Xerox Holdings Corporation announced on December 23, 2024, its ambitious plan to acquire Lexmark International, the Lexington-based printer manufacturer, for $1.5 billion. This acquisition is notable not only for its size but also because it symbolizes Xerox's strategic efforts to rejuvenate its core business amid significant market challenges.
Lexmark, known for its innovative imaging solutions, has been under the ownership of foreign investors, having been acquired by Ninestar Corporation, PAG Asia Capital, and Shanghai Shouda Investment Centre for approximately $3.6 billion back in 2016. The current acquisition by Xerox marks a significant shift, returning Lexmark to U.S. ownership.
According to Steve Bandrowczak, the CEO of Xerox, this merger will create “one stronger organization” by leveraging the complementary strengths and shared values of both companies. He emphasized the intention to drive long-term profitable growth and serve clients more effectively through the expanded capabilities the merger will bring.
Scott Shive, director of global communications at Lexmark, noted the company's global footprint, employing around 8,000 people and servicing over 200,000 clients across 170 countries from 125 manufacturing and distribution facilities. This merger will position the combined entity among the top five global players across various print markets, reaffirming its competitive edge.
Looking toward the future, the merger is expected to close in the second half of 2025. Until then, both companies will continue to operate independently, maintaining their current operations. This timeline is subject to regulatory approvals and shareholder consent from the investor group of Ninestar.
Bandrowczak's vision for the future is clear; he sees great potential for achieving significant cost synergies—around $200 million—within two years of closing. This focus on financial efficiency is underscored by Xerox's plans to reduce its annual dividend from $1 per share to 50 cents per share starting from the first quarter of 2025, thereby allowing more capacity to tackle debt and reinvest strategically.
Allen Waugerman, Lexmark's president and CEO, echoed Bandrowczak's optimism, stating, “Lexmark has a proud history of serving our customers with world-class technology, solutions and services.” He believes the merger will enable both companies to expand their collaboration, enhancing the portfolio of offerings available to clients worldwide.
With Lexmark's strengths particularly pronounced within the growing A4 color printing market, this acquisition aims to create additional growth opportunities, particularly within Asia-Pacific, where Xerox seeks to establish a more significant presence.
The strategic rationale behind this acquisition isn't just about scale; it’s also about enhancing Xerox’s product offerings and client service model. By integrating Lexmark’s leading technologies with Xerox's ConnectKey technology, the companies aim to deliver superior services and solutions to customers increasingly reliant on managed print services.
Moving forward, both companies are fully committed to making this merger successful, with both Bandrowczak and Waugerman energized by the possibilities. They stress the importance of aligning operations to maximize efficiencies, making it easier for clients to engage with their combined services.
Despite the excitement surrounding the deal, there remain potential challenges, including the need for smooth regulatory sign-off and the complex integration of two distinct corporate cultures. Further, with Xerox's declining revenues over the past quarters, it must demonstrate to its shareholders and clients alike how this merger will not only stabilize but grow the company.
The acquisition of Lexmark stands as one of the most significant moves for Xerox since its last notable transaction which included acquiring ITsavvy for $400 million. The company is entering 2025 with determination, aiming to revitalize its business strategy and competitive position within the print industry.
With this landmark acquisition, Xerox is hoping to emerge as not just a survivor, but as a formidable contender ready to challenge competitors such as HP and Canon more effectively. The future will depend on how swiftly and efficiently they can meld their operations and capitalize on the combined strength of their merged technologies.
