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Xerox's Conduent Spinoff Debuts

Xerox's Conduent Spinoff Debuts

Conduent Inc (NYSE: CNDT), the spinoff unit of Xerox Corp (NYSE: XRX), announced its separation from the parent-company and trading debut earlier Tuesday.

The plan to split into two companies, one focusing on document technology and another on business process outsourcing, was announced in January 2015. The decision followed a review of the company's portfolio and capital allocation options announced in 2015.

What's In A Name?

Xerox officially unveiled the name of the business outsourcing company as Conduent in June 2016, a name that reflected its expertise in connecting clients and their constituents through seamless transactions at a massive scale. Ashok Vemuri, who was previously CEO and president of iGate, was named as the CEO of Conduent.

Conduent Vs. New Xerox

After the split, Conduent is supposed to employ 96,000 people worldwide compared to the 49,000 for the new Xerox company. The former is estimated to have rung in revenues of $7 billion in 2015 compared to $11 billion by the new Xerox. The company said in January that activist investor Carl Icahn would receive three Conduent board seats following the spinoff. Conduent, began trading on a "when issued basis" on the New York Stock Exchange under the ticker symbol CNDT WI on December 13, 2016, and began trading regularly Tuesday under the ticker symbol CNDT.

Terms Of Spinoff

Each of Xerox shareholders are to receive one share of Conduent common stock for every five shares of Xerox common stock they hold as of the close of business on December 15, 2016, the record date for the distribution. Fractional shares of Conduent common stock will be aggregated and sold in the open market, with the net proceeds distributed pro rata in cash payments to the Xerox shareholders, who would otherwise receive a fractional share of Conduent common stock.

Hiccups En Route

Darwin Deason, one of Xerox's largest shareholders, owning 6.1 percent of shares, sued the company in October in a U.S. district court over the spinoff. In late October, the company said it had settled with Deason, with the settlement terms calling for the award of 180,000 shares of Xerox's preferred stock and 120,000 preferred stock of Conduent.

Conduent's Focus

Conduent's business includes the operations of Affiliated Computer Services founded by Deason and bought by Xerox for $6.4 billion in 2010. The company focuses on transaction-intensive processing, analytics and automation in areas such as healthcare, transportation solutions, customer care and digital processing. The company's business benefits roughly two-thirds of all insured patients in the United States and nearly nine million people travelling through toll systems daily. However, the analyst community is not completely sold on the idea of the prospects of Conduent.

Investors Skeptical

The original Xerox stock lost about 18 percent in 2016, trading in the range of $8.70–$11.25 amid the developments. It remains to be seen if the new Xerox, which continues to trade under XRX, will get some reprieve from the spinoff.

Image Credit: By Raysonho @ Open Grid Scheduler / Grid Engine (Own work) [CC0], via Wikimedia Commons


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