Proposed class-action suit says merger agreement undervalues ACS and dissuades other bidders.

Paul McDougall, Editor At Large, InformationWeek

October 2, 2009

1 Min Read

A Philadelphia law firm has turned to the Web to drum up support for a shareholder lawsuit it plans to file against Affiliated Computer Services, the outsourcer Xerox plans to acquire for $6.4 billion.

The firm of Howard G. Smith this week placed prominent search ads on Google that urge ACS shareholders to join the suit. The firm claims Xerox's offer undervalues ACS and that terms of the merger agreement dissuade other companies from making a competing offer.

A page on Howard G. Smith's Web site features an online form that shareholders can use to participate in the action. A spokesman for ACS declined to comment.

Xerox said Monday it reached a deal to acquire ACS for $6.4 billion. Xerox officials called the agreement a "game changing" move that will see their company marry its imaging hardware with ACS's business services, which include handling forms processing for numerous state, federal, and healthcare organizations.

Xerox said the acquisition would contribute positively to earnings in its first year. ACS officials said the buyout would help their company extend operations worldwide.

Xerox's plan to buyout ACS is the latest sign of consolidation in the highly competitive IT and business services market. Dell last week announced a deal to acquire Perot Systems for $3.9 billion, while Hewlett-Packard snapped up Electronic Data Systems for $13.9 billion last year.

ACS shares were off 1.8%, to $52.13, in afternoon trading Friday. Shares of Xerox, which have lost about 17% of their value since the deal's announcement, were down 1.94%, $7.34.

InformationWeek Analytics and DarkReading.com have published an independent analysis of security outsourcing. Download the report here (registration required).

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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