By Jaspreet Singh and Aditya Soni
(Reuters) – Office equipment maker Xerox has agreed to buy Chinese printer and printing software maker Lexmark International in a $1.5 billion deal to expand its presence in Asian markets and better compete in an industry consumed by the digital age.
The purchase by Ninestar, PAG Asia Capital and Shanghai Shouda Investment Center will bring Lexmark back into US ownership. Formed out of IBM in 1991, Lexmark was sold to a group of Chinese investors in a $3.6 billion deal in 2016.
Global household name Xerox has posted revenue declines for five straight quarters as demand for printing equipment expanded and it faced tough competition from HP and Canon.
Its shares, down more than 50% this year, jumped 7% on Monday.
Lexmark, already a Xerox supplier, will boost its presence in the A4 color printing segment, one of the few areas of expansion in an industry facing challenges due to the shift to digital documents.
The combined company is expected to serve more than 200,000 clients in 170 countries and have a market share among the top five companies globally in various printing segments.
Xerox expects the deal to immediately boost profits and deliver more than $200 million in annual cost savings by helping to reduce marketing and real estate costs, among others.
“That money can be reinvested for the future. Xerox has set themselves up for the future,” said Zeus Kerravala, chief analyst at ZK Research.
In 2020, Xerox had made a hostile bid of $35 billion for HP before the COVID-19 pandemic derailed its plans. Its market value has since shrunk to about $1 billion from about $8 billion that year.
Xerox expects to finance the Lexmark deal, which is likely to close in the second half of 2025, through cash on hand and debt. To help with financing, it is reducing an annual dividend to 50 cents per share from $1.
The company said it does not expect any regulatory challenges for the deal, which would require approval from countries, including China.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Shilpi Majumdar)