Xerox to Buy an Office Supplier in Move to Serve Small Business

Xerox said yesterday that it would buy Global Imaging Systems, a provider of office technology products, for $1.5 billion as it sought to expand its reach in the small and midsize business markets.

The acquisition will be Xerox’s third and largest in the last 12 months as it tries to bolster growth in equipment revenue, a sore point in its fiscal third-quarter results.

“Our biggest barrier to growth was distribution,” the Xerox chairman and chief executive, Anne M. Mulcahy, said in a conference call with analysts.

Global Imaging sells printers and copiers to small and midsize businesses, and it will start selling Xerox document-management products after the acquisition.

Xerox, the world’s largest provider of office printers, copiers and related services, said it would pay $29 for each share of Global Imaging, a premium of almost 50 percent to its Friday closing price of $19.50. Shares of Global Imaging rose $9.14, to $28.64. Shares of Xerox rose 19 cents, to $17.08.

The purchase will expand Xerox’s distribution by 50 percent in the estimated $16 billion market to small to midsize businesses. The deal is expected to close in May.

Xerox, based in Stamford, Conn., said it expected the acquisition to bolster 2007 earnings. The acquisition will add about 200,000 new customers. Global Imaging generates about $1 billion in annual sales, the company said.

Global Imaging operates 21 regional companies and is the product of about 80 acquisitions. Xerox executives said Global, to operate as a wholly owned subsidiary, would continue to seek purchase opportunities.

“This is not a fixer-upper,” Ms. Mulcahy said. “It’s a really well run, high-performing company.”
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