NOTE TO EDITORS: The Following Is an Investment Opinion Being Issued by AnalystChoice.com (AC).

Xerox WorkCentre MFP Users Can Access Cost Recovery & Print Management Services Directly From the MFP Touch Screen

Xerox, Affiliated Merger Clears Shareholder Suit

Ursula M. Burns graduated from college nearly 30 years ago when “women CEOs were non-existent” and “black women CEOs were unimaginable ” as she told this spring's graduating class at Rochester Institute of Technology.“I can assure you that at my commencement no one was pointing at me and predicting that I would become CEO of anything ” she said.The audience had to laugh. Just a day before Burns had been named CEO of not just any company but Xerox (XRX) a $17 billion industry leader. She moved into the top spot in July taking over from Anne Mulcahy who ...

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By Kiyoshi Takenaka and Gilbert KreijgerTOKYO/AMSTERDAM (Reuters) - Japan's Canon plans to buy Dutch copier and printer maker Oce OCEN for 730 million euros ($1.09 billion), challenging rivals Ricoh and Xerox XRX in a hunt for growth during the sector downturn.Copier and digital camera maker Canon and Oce...

Sound Advice bravely proclaimed a new bullish 'supercycle' back in the spring. It refused to be swayed when confidence crumbled in September. And today, it's still confident.

Affiliated Computer Services Inc. (ACS) announced that the complaint filed by ACS shareholders regarding its merger with Xerox Corp. (XRX) has been resolved. The plaintiffs have temporarily withdrawn their motion for an injunction to block the deal. The lawsuit was filed in October in Dallas County, Texas as Xerox was struggling to convince its shareholders to [...]

(ACS) Settlement in Xerox-Affiliated Computer Services Merger

For Immediate Release

Chicago, IL – November 25, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Affiliated Computer Services Inc. (ACS), Xerox Corp. (XRX), Expedia Inc. (EXPE), Orbitz Worldwide (OWW) and Priceline.com (PCLN).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s Analyst Blog:

Settlement in Xerox-ACS Merger

Affiliated Computer Services Inc. (ACS) announced that the complaint filed by ACS shareholders regarding its merger with Xerox Corp. (XRX) has been resolved. The plaintiffs have temporarily withdrawn their motion for an injunction to block the deal.

The lawsuit was filed in October in Dallas County, Texas as Xerox was struggling to convince its shareholders to approve the deal.

The plaintiffs agreed to drop the lawsuit only if ACS’s Board of Directors received a better proposal than Xerox’s current bid and Xerox did not force ACS’s Chairman Darwin Deason to exercise his voting power in favor of the Xerox acquisition. The previous agreement called for Mr. Deason to cast half his votes in favor of the Xerox bid. He controls 44% of the votes at ACS.

Xerox has also decided not to force ACS to hold a shareholder meeting to vote on the Xerox transaction, and if requested by the Xerox’s shareholders ACS will terminate the Merger Agreement. Xerox also said that a pension fund has dropped a lawsuit over the purchase of ACS. However, a separate shareholder class action lawsuit is still pending in Delaware.

In September, Xerox agreed to acquire Affiliated in a cash and stock transaction valued at $6.4 billion ($63.11 per ACS share in cash and Xerox stock). Affiliated shareholders will receive $18.60 in cash and 4.935 shares of Xerox for each ACS share. Xerox will also assume $2 billion of ACS’s debt and issue $300 million of convertible preferred stock to ACS shareholders.

Downgrading Expedia to Neutral

We are downgrading shares of Expedia Inc. (EXPE) from Outperform to Neutral.

The company reported strong results in the last quarter, but continued to benefit from promotional inventories provided by its hotel partners. When results are stripped off the benefits of promotional activities, a softer demand environment could become evident.

We also do not expect the company to report better than seasonal sales growth in the current quarter.

The company has sacrificed booking fees this year, which is telling on the average daily rates (ADRs). Therefore, ADRs could be the metric to watch rather than room nights at this point of time.

We are also concerned about the incidence of transient occupancy taxes. Although municipalities and governments have decided that they will recover occupancy taxes from hotels if they lose out to online travel companies, we note that Expedia has already lost in Georgia and the company is slated to pay out $55 million to the City of San Francisco.

A fresh suit has now been filed by Florida, and for the first time the company has been charged under the Florida Deceptive and Unfair Trade Practices Act. Five Florida counties have decided to charge Expedia, as well as other online travel companies such as Orbitz Worldwide (OWW), Priceline.com (PCLN) and Travelocity for recovery of transient occupancy taxes. The company made a hefty provision in the June quarter, but we fear that this could be insufficient if the cases continue. Fines of this magnitude have the potential to develop into a constant drain on cash.

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Affiliated Computer Services Inc. (ACS) announced that the complaint filed by ACS shareholders regarding its merger with Xerox Corp. (XRX) has been resolved. The plaintiffs have temporarily withdrawn their motion for an injunction to block the deal.

The lawsuit was filed in October in Dallas County, Texas as Xerox was struggling to convince its shareholders to approve the deal.

The plaintiffs agreed to drop the lawsuit only if ACS’s Board of Directors received a better proposal than Xerox’s current bid and Xerox did not force ACS’s Chairman Darwin Deason to exercise his voting power in favor of the Xerox acquisition. The previous agreement called for Mr. Deason to cast half his votes in favor of the Xerox bid. He controls 44% of the votes at ACS.

Xerox has also decided not to force ACS to hold a shareholder meeting to vote on the Xerox transaction, and if requested by the Xerox’s shareholders ACS will terminate the Merger Agreement. Xerox also said that a pension fund has dropped a lawsuit over the purchase of ACS. However, a separate shareholder class action lawsuit is still pending in Delaware.

In September, Xerox agreed to acquire Affiliated in a cash and stock transaction valued at $6.4 billion ($63.11 per ACS share in cash and Xerox stock). Affiliated shareholders will receive $18.60 in cash and 4.935 shares of Xerox for each ACS share. Xerox will also assume $2 billion of ACS’s debt and issue $300 million of convertible preferred stock to ACS shareholders.

As a subsidiary of Xerox, Affiliated will operate independently. The combined company will have greater BPO capability and help expand Affiliated’s presence in international markets. Currently, the BPO market is about $130 - $150 billion, with an average growth rate of around 5% to 10% a year. With the Xerox/Affiliated merger, the total market opportunity will be more than $500 billion.

The combined company plans to cut ongoing costs by up to $400 million a year from 2012 onwards. It is currently expected to generate $22 billion in revenues, of which $17 billion is expected to be of a recurring nature and $10 billion is expected to come from services. The transaction is expected to be accretive in fiscal 2010.

In our opinion the deal is now open to third-party bidders provided they pay a higher price for ACS. Trading currently below the acquisition price, we believe the deal to be beneficial for Affiliated, however Xerox may face integration related issues.

Due to the expected merger, ACS did not provide financial guidance for the second quarter or fiscal year 2010.

Shares of Xerox rose 1.3% to $7.93, while ACS increased 1.1% to $55.90.

We have a Neutral rating on both ACS and Xerox.
Read the full analyst report on "ACS"
Read the full analyst report on "XRX"
Zacks Investment Research

On September 28, I posted an article titled ‘Bullish on Xerox’s ACS deal’. It seems the return of liquidity, and comparatively easy credit standards in the global financial markets are driving and counter-driving top companies in each sector up their ante on mergers and acquisitions. Canon is the latest to join the party.[More...]

Today’s tickers: CRI, RDC, XL, VIX, XHB, XRX, EFA, WYNN, BIDU & XHB

CRI - Carter’s Inc. – The more than 20,500 option contracts exchanged thus far today on the children’s apparel company trumps existing open interest of just 3,342 lots by a factor of 6. Shares of Carter’s are suffering significant erosion after the firm announced plans to delay its third-quarter earnings release, originally scheduled for this evening, perhaps until November 12, 2009. News of the postponement sent shares tumbling 25.5% lower to $21.16. Investor uncertainty jumped through the roof as evidenced by the massive 66% rise in option implied volatility this morning to an intraday high of 90%. Bullish investors took advantage of today’s declines by trading near-term call options. One trader put on a ratio call spread by purchasing 1,000 calls at the in-the-money November 20 strike for 2.30 apiece, and by selling 2,000 calls at the higher November 25 strike for 55 pennies each. The net cost of buying the calls is reduced to 1.20 per contract. The effective breakeven price of $21.20 on the transaction allows the investor to profit by expiration in November if shares of CRI rise at least 4 cents. Maximum potential profits of 3.80 per contract are available if the stock recovers up to $25.00. Losses would begin to accumulate if any rally lifted the share price above $28.80.

RDC - Rowan Companies, Inc. – Option traders scooped up put options on the provider of contract drilling services while shares slumped 2.75% to $24.90. The January 2010 22.5 strike had at least 1,400 puts purchased for an average premium of 1.16 apiece. The now in-the-money January 25 strike attracted traders who picked up 1,300 puts for about 2.15 each. Bearish sentiment spread to the April contract where another 2,000 puts were coveted at the April 22.5 strike for 2.02 a-pop. Finally, the most action took place at the in-the-money April 25 strike where 9,800 puts were purchased for an average of 3.18 each. Perhaps put-buying investors are aiming to protect the value of long positions in the underlying. Otherwise, traders placing bearish bets on RDC hope to accumulate profits on further share price weakness over the next several months.

XL - XL Capital Ltd. – Bullish investors took aim at XL Capital put options in the January contract this afternoon. Shares of XL are slightly higher by less than 0.25% to stand at the current price of…

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