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January 29, 2016updated 30 Aug 2016 3:04pm

Xerox to split into two companies, Carl Icahn gets three board seats

News: Company will divide into two publicly traded companies.

By CBR Staff Writer

Xerox is reportedly planning to split itself into two companies due to pressure from activist investor Carl Icahn.

Citing people familiar with the matter, the Wall Street Journal reported that Xerox will divide into two publicly traded firms with one focused on hardware and the other on services.

As part of the move, Icahn will get three board seats at the services unit of the company.

In November, Icahn disclosed an interest in Xerox and said he would seek negotiations with the company regarding its future.

Icahn’s hedge fund has an 8.1% interest in Xerox. It is currently the second-largest shareholder after Vanguard Group.

Commenting on Xerox’s move, Icahn told CNBC, "We think this is a major move and will greatly enhance shareholder value.

"I have had several meetings with [CEO] Ursula Burns and applaud and respect her for doing what she believes shareholders want — just as John Donahoe did with eBay and PayPal."

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Last October, Xerox said it will review its business portfolio and capital allocation options after reporting its financial results for the third quarter.

Revenue declined 10% to $4.3bn in Q3, compared to $4.79bn in the same three-month period a year ago. The company posted a net loss of $34m, compared with a net income of $266m in the year-ago period.

Xerox’s results had failed to meet analyst expectations since its $6.4bn acquisition of Affiliated Computer Services in 2010. The split is expected to undo that merger.

The company, which generates around $20bn in annual sales, reportedly has a market value that is less than 50% of its annual sales.

Xerox has taken steps to accelerate cost reductions and prioritise investments for driving improved productivity and higher margins.

Headquartered in Norwalk, Connecticut, Xerox has more than 130,000 employees in over 180 countries.

The company provides global services from claims reimbursement and automated toll transaction to customer care centres and HR benefits management.

 

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