Tuesday September 29, 03:18 AM
ACS founder Deason finally accepts a buyout suitor
By Clare Baldwin and Ian Sherr
SAN FRANCISCO, Sept 28 (Reuters) - Darwin Deason, the hard-charging son of an Arkansas chicken farmer, is set to rake in hundreds of millions of dollars from Xerox Corp (NYSE: XRX
- news) 's planned deal to take over Affiliated Computer Services -- the company he founded just two decades ago.
It's third-time lucky for the 69-year-old, who founded the company in 1988 and turned it into a multibillion-dollar provider of office outsourcing services before flirting briefly -- but fruitlessly -- with would-be private equity buyers Texas Pacific Group and Cerberus.
If the deal with Xerox closes, ACS (Madrid: ACS.MC - news) chairman Deason is set to net more than 44 million shares of Xerox common stock, $300 million in convertible preferred Xerox stock, and $167.4 million in cash. That works out to more than $800 million.
'At closing, I will become one of the combined company's largest individual shareholders, and I intend to remain a long-term investor,' Deason said in a statement on Monday.
But Deason, who was not available for additional comment, will have to give up his seat on the company's board.
Private equity firms have courted ACS in the past, attracted by its recurring revenue model and steady cash generation.
The company's board twice rejected buyout offers, once in 2005 from TPG, then again in 2007 when independent board members decided a $62-a-share buyout offer from Deason and Cerberus Capital Management undervalued the company.
'The breakdown with Cerberus was more over disagreements on how to run the process than the price,' a source familiar with the deal told Reuters. Given the failed Cerberus buyout, 'people didn't really think Darwin Deason, who controls 42 percent of the vote, really wanted to sell the company.'
Five independent directors resigned from the ACS board after the 2007 deal with Cerberus collapsed, accusing Deason of 'bullying'.
LONG COVETED BY XEROX
Xerox has long coveted ACS but only approached the company in the first quarter of this year, other sources told Reuters on Monday.
But Xerox investors were skittish about the company's investment in outsourcing and shares of Xerox closed down nearly 14.5 percent at $7.68 on the New York Stock Exchange. Shares of ACS closed up almost 14 percent at $53.86.
'You don't judge a deal like this in a day,' said ACS spokesman Mike Buckley.
Deason moved to Tulsa, Oklahoma, after graduating from high school with a Pontiac and just $50 in his pocket. He got a job with Gulf Oil Corporation Ltd, then moved on to MTech Communications PLC, eventually becoming CEO, before founding ACS and serving as CEO and then chairman.
Deason at one point worked for Ross Perot, the Texan billionaire who founded and sold both Electronic Data Systems (NYSE: EDS - news) and Perot Systems (NYSE: PER - news) , to Hewlett-Packard and Dell , respectively.
During his years at ACS, Deason was known for carrying 'hustle' cards with phrases like 'do it right and do it now,' said one person close to Deason. His strategy was a mix of cost cutting by outsourcing and providing better service.
But his aggressive business style did not prevent him living a comfortable lifestyle, replete with yacht and a Dallas penthouse, according to the person close to Deason.
(Additional reporting by Anupreeta Das; Editing by Edwin Chan) Keywords: ACS XEROX/DEASON Keywords: ACS XEROX/DEASON
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