Pension drops lawsuit against ACS over Xerox buy

AP News
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Posted: Nov 23, 2009 10:52 AM

Xerox Corp. said Monday that a pension fund has dropped a lawsuit over provisions in the copier company's purchase of Affiliated Computer Services Inc. that would have made it tough for a better buyout offer to succeed.

Xerox said the plaintiffs, City of St. Clair Shores Police and Fire Retirement System in Michigan, ended the litigation after the copier company agreed to remove roadblocks to a superior offer for ACS.

Xerox agreed that if the ACS board receives a better offer to its $5.6 billion cash-and-stock bid for ACS, the copier company will not require ACS Chairman Darwin Deason to vote his shares in favor of Xerox.

The previous agreement would have forced Deason to give half of his votes to support the Xerox bid. He controls a 44 percent of the votes at ACS.

Xerox also won't force ACS to hold a shareholders meeting to vote on the Xerox bid but instead end the merger if requested.

The lawsuit was filed in October in Dallas County, Texas. A separate shareholder class action lawsuit is pending in Delaware.

In September, Xerox said it was buying ACS in a cash-and-stock deal to diversify its revenue from copier sales to services. Businesses outsource a variety of services to ACS, including finance, human resources and customer service. The transaction is expected to close in the first quarter.

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Xerox also will assume $2 billion of debt and issue $300 million in convertible preferred shares to Class B shareholders of ACS.

Shares of Xerox, based in Norwalk, Conn., rose 10 cents to $7.93 in morning trading. ACS, based in Dallas, added 50 cents to $55.80.