Xerox in Talks to Merge Copier Business With R.R. Donnelley

  • Xerox would be acquirer, merge R.R. Donnelley with spun units
  • Xerox-Donnelley deal said possible before Xerox split year-end

Xerox Corp., which plans to separate into two companies by the end of the year, is in talks to acquire R.R. Donnelley & Sons Co., people with knowledge of the matter said.

Xerox would acquire R.R. Donnelley, founded in 1864 and based in Chicago, and merge some of it with its copier, printer and related-services business and the rest with its smaller business process outsourcing services, said the people, who asked not to be identified because the negotiations are private.

The talks are at an early stage, one of the people said. A deal could be announced before Xerox’s split is completed, another person said. R.R. Donnelley jumped as much as 12 percent in afterhours trading, while Xerox climbed as much as 3.2 percent.

R.R. Donnelley, the owner of the Edgar financial-statement wire service, announced it planned to split into three publicly traded companies last year. A deal with Xerox would negate that plan, the people said.

Representatives of Xerox and R.R. Donnelley declined to comment. Xerox has a market value of about $9.6 billion based on Monday’s closing share price, while R.R. Donnelley has a market value of about $3.9 billion.

Last month, Xerox named Jeff Jacobson the new chief executive officer of its copier business. Ashok Vemuri is slated to take on the CEO role for the smaller of the post-split companies, which will be called Conduent. Xerox’s document technology generated about $11 billion in 2015 revenue, compared with $7 billion in sales from the outsourcing business.

Xerox and R.R. Donnelley have both seen opportunity in pursuing a merger, one of the people familiar with the matter said, after Hewlett Packard Enterprise Co. and Computer Sciences Corp.’s market valuations climbed following their announcement of a spin-merger in May.

Trading in R.R. Donnelley call options quadrupled on July 7 compared with the average of the previous 20 days, while open interest also increased, according to data compiled by Bloomberg.

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