Acsm Agam (BIT:ACS)
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Xerox Inc. (XRX) expects its $6.4 billion acquisition of Affiliated Computer Services Inc. (ACS) to yield more than $95 million in pretax cost savings in the first year the companies are combined.

The deal, expected to have $300 million to $400 million in such savings in the first three years, will yield cross-selling opportunities and international expansion for the combined businesses, executives from both companies said in a conference call Monday.

"The lines between business process and document management are blurring," Ursula Burns, who became Xerox's chief executive July 1, said.

The deal comes as Xerox shifts its business model to concentrate more on services revenue, which will now rise to $10 billion in 2009 from just $3.5 billion last year, when Xerox had total revenue of $17.6 billion.

The companies expect the deal to have "upside revenue synergy potential" that is "significantly higher" than the cost savings.

The savings in the first three years will include $50 million to $75 million in total restructuring costs.

The deal will generate about $250 million in additional cash over three years, most of which will come from tax benefits, the companies said.

Under the deal, ACS shareholders will get $63.11 a share, through $18.60 in cash and 4.935 shares of Xerox. Xerox will also assume $2 billion of ACS debt and issue $300 million of convertible preferred stock.

In the call, the companies said they expect the cash portion to be financed with $1 billion from combined company cash and existing revolving credit agreements, along with $3 billion to be raised in the capital markets.

-By Thomas Gryta; Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com