Xerox kicks rumoured merger into touch

By Darryl Danielli, Friday 15 July 2016

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Xerox appears to have dismissed a possible merger with RR Donnelley, the world’s largest print group.

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Xerox understood to have canned Donnelley deal

Bloomberg broke a story earlier this week suggesting that Xerox was in early stage talks to buy the $11.6bn (£8.8bn) turnover, US-headquartered RR Donnelley.

However, according to the Wall Street Journal, Xerox, which is on the verge of splitting it’s business into two listed companies, has privately rejected the bid.

Neither company has made a statement.

While the deal appears to have now been shelved, the paper’s report added significantly more detail in to what the proposal involved.

It claimed that RR Donnelley had approached Xerox with a view to aborting its ongoing split into three standalone businesses and merging its entire operation with Xerox’s post-split document technology and graphics business Xerox Corporation.

The paper’s report went on to say that RR Donnelley had proposed to structure the deal as a 'Morris Trust', which it described as “tax efficient set-up in which Xerox would get a slight premium”.

A “Morris Trust” deal is where a parent company spins off the assets not wanted by the buyer into a new company, which allows the buyer to acquire the parent company, and the assets it wants, in a tax-free reorganisation.

The paper went on to detail that once the merger had gone through, Donnelley executives would run the merged business and instigate cost savings of “several hundred million dollars”.

However, this all now appears to be a moot point as the paper stated that Xerox rejected Donnelley’s proposal yesterday as it believed its ongoing plan to restructure by splitting into two businesses was “less risky”.

Xerox will split into two businesses at the end of the year: $11bn (£8.4bn) turnover document technology and graphics business, Xerox Corporation, and the $7bn BPO business, Conduent.

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