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Xerox gobbles up Global for $1.5B

The Tampa company will become a Xerox subsidiary.

By Scott Barancik
Published April 3, 2007

After years of gobbling up small-fish companies across the country, Tampa's Global Imaging Solutions Inc. is being swallowed by the Moby Dick of the office-equipment industry: Xerox Corp.

Xerox said Monday it will pay $1.5-billion, or $29 per share, for Global, a distributor of photocopiers and fax machines. The publicly traded company roared past the $1-billion revenue mark for the first time last year and is among the bay area's fastest-growing and most consistent performers. Shareholders are expected to receive a cash tender offer this week.

Xerox's largest deal in at least 20 years would give the legendary Stamford, Conn., company access to Global's 30-state network of locally run subsidiaries and roughly 200,000 small and medium-sized corporate clients. Xerox has largely focused on Fortune 500 companies. In turn, Global would gain access to Xerox's product line while creating a handsome payday for its investors.

News of the deal drove Global's stock up 47 percent on Monday, or $9.14 per share, to close at $28.64. Although Xerox's stock fell 1 percent to close at $17.08, Wall Street analysts were mostly upbeat about the deal. At least one credit-rating agency vowed to boost Xerox's grade.

Global wasn't looking to be acquired. In an interview Monday, founder and CEO Tom Johnson said Xerox initially called him in December about becoming a Global vendor. The Tampa company's network currently sells, leases and services products made by manufacturers such as Canon, Ricoh and Sharp. But by January, both sides agreed that a closer arrangement might be desirable.

Johnson, a 61-year-old Plant City native and University of Florida graduate, said Global would become a wholly owned Xerox subsidiary but operate with significant autonomy.

Its 45-person Tampa headquarters would remain largely intact, with Johnson at the helm, and maintain its aggressive acquisition schedule. Its sales staff of 1,400 would offer clients Xerox products as well as those of competing manufacturers. All of Global's 4,500 employees would become Xerox employees.

"They're going to leave us as a standalone subsidiary," said Johnson. "As long as they allow us to continue to be entrepreneurial, maintain high touch with our customers and let us take care of our employees, we'll be happy."

Since founding the company in 1994, Johnson has methodically built Global by acquiring dozens of well-run local companies. What makes his strategy unusual is that Johnson lets the companies keep their names, makes sure their owners stay on as managers, and then gets out of the way - provided the subsidiaries meet his unusually high productivity and profit benchmarks.

"Global actually did what Ikon Office Systems and Danka (Business Systems) said they'd do: remain a big company but keep a local flavor," said Tom Frederick, president and co-founder of Tampa's Zeno Office Systems.

Danka, a British distributor with U.S. headquarters in St. Petersburg, grew at a similarly brisk pace in the 1990s but ran into trouble after it acquired the much larger copier business of Eastman Kodak. A smaller Danka now focuses on the U.S. market, but its stock routinely trades just above $1 per share.

Though its scale is many times larger, Xerox also has suffered rough times. Once among America's most revered brands, Xerox struggled for many years and only recently put its fiscal house in order. Johnson credited chairman and CEO Anne Mulcahy with turning the company around.

"I think Anne Mulcahy has done a miraculous job of pulling them back from the brink of bankruptcy," he said.

Some observers Monday expressed skepticism that Global would be free to sell or lease products other than Xerox's own. "Let's be reasonable here," said Keith Kmetz, an industry analyst at the IDC consulting firm in Framingham, Mass. "If you're a Xerox company, what (brands) are you going to carry?"

Frederick, the Zeno executive, said he thinks the deal could eventually damage Global's stature among small and medium-sized companies.

"Bottom line is, they're now a part of a giant, faceless corporation," he said. "I just think it will make large, strong independents like us even healthier. Quite honestly, I think it's great news for me."

Johnson said Global's vendors will have the opportunity to air their views in face-to-face meetings today and Wednesday.

"I think it'll largely depend on their response," he said. "We will still sell large volumes for them for the foreseeable future."

Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.

Xerox

- Headquarters: Stamford, Conn.

- CEO: Anne Mulcahy

- Business: World's largest maker of high-speed color printers

- 2006 Sales: $15.9-billion

- 2006 met income: $1.2-billion

Global Imaging Services

- Headquarters: Tampa

- CEO: Tom Johnson

- Business: Sells copiers and printers to small and mid-sized companies

- 2006 Sales: $1.03-billion

- 2006 net income: $61.9-million

Deals getting done at dizzying pace

Tampa Bay companies are shedding their shareholders at a rapid clip. In addition to Global Imaging, at least three have buyouts pending.

The biggest, OSI Restaurant Partners Inc. of Tampa, parent of Outback Steakhouse, has a $3.2-billion deal to be acquired by a group of private equity firms. St. Petersburg-based Catalina Marketing Corp. agreed to be acquired by its largest shareholder, ValueAct Capital Management, for $1.6-billion, and Ablest Inc. of Tampa has a $22-million management-led buyout pending.

Among the recently completed deals: Tampa companies Reptron Electronics, acquired by Kimball Electronics Group; Maritrans Inc., acquired by Overseas Shipping Group; and Checkers Drive-In Restaurants, acquired by Wellspring Capital Management. In addition, Certegy Inc. of St. Petersburg merged last year with Fidelity National Financial.

[Last modified April 2, 2007, 22:43:15]