Domtar to Buy Xerox's Paper Business

Zacks

In a concerted effort to strengthen its presence in the North American market through lateral expansion, Domtar Corporation (UFS) signed a deal to acquire the U.S. and Canadian paper and print media products business of Xerox Corporation (XRX) for an undisclosed amount.

With revenues of $5.5 billion in 2012, Domtar manufactures and distributes a wide array of fiber-based products including communication papers, specialty and packaging papers and adult incontinence products. The company is the largest integrated marketer of uncoated freesheet paper in North America with established brands such as Cougar, Lynx Opaque Ultra, Husky Opaque Offset, First Choice and Domtar EarthChoice. Domtar also owns and operates an extensive network of strategically located paper and printing supplies distribution facilities.

The acquisition will enable Domtar to expand its product portfolio and augment its revenues by capitalizing on the Xerox brand name. Although Xerox do not manufacture paper products on its own, it has managed to create a niche market for a wide range of coated and uncoated papers, specialty print media, and carbonless and wide-format paper by using its brand name. Post-acquisition, the acquired business entity will form a part of the paper and pulp segment of Domtar.    

On the other hand, the divestiture will enable Xerox to focus more on its services and innovative document technology. At the same time, Xerox will benefit through a trademark licensing agreement with Domtar. The company will also continue to manufacture and sell its consumables like toner and ink, and Xerox Replacement Cartridges.    

Headquartered in Norwalk, CT, Xerox is a leader in the development, manufacture, marketing, servicing and financing of document equipment across the world. The company also provides extensive leading-edge document technology, services, software and genuine Xerox supplies for graphic communication and office printing environments of any size. The company has three operating segments – Technology, Services and Others.

Xerox faces stiff competition from other players in the industry such as NCR Corp. (NCR), carrying a Zacks Rank #2 (Buy), and Concurrent Computer Corporation (CCUR), which carries a Zacks Rank #1 (Strong Buy). Xerox currently has a Zacks Rank #3 (Hold).

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