Office equipment supplier Xerox Corporation is to buy Dallas based data center management and business process outsourcing firm Affiliated Computer Services in a cash and stock transaction valued at $6.4 billion.

"We're creating a new class of solution provider," said Ursula M. Burns, Xerox chief executive officer. "A game-changer for Xerox, acquiring ACS helps us expand our business and benefit from stronger revenue and earnings growth. Xerox becomes a $22 billion global company, of which $17 billion is recurring revenue - a significant boost to our profitable annuity stream. The revenue we generate from services will triple from $3.5 billion in 2008 to an estimated $10 billion next year."

ACS shareholders will receive a total of $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own. Xerox will assume ACS's debt of $2 billion and issue $300 million of convertible preferred stock to ACS's Class B shareholder.

Lynn Blodgett, president and chief executive officer, ACS, said: "We know that for ACS to expand globally and differentiate our offerings through technology, we need a partner with tremendous brand strength and leading innovation. Xerox offers that and more to bring our business to the next level while strengthening theirs."

In June this year Affiliated Computer Services said it would take over the running of Novell's data center operations in Provo, Utah as part of a global services deal which will see the outsourcer take Novell's data center products to market. Under the IT outsourcing arrangement, around 150 Novell data center staff will move to ACS, including the infrastructure and application development and maintenance services operations. ACS will also take over Novell's global SAP roll out by providing consulting and applications development and system integration services in a $135 million, five-year contract.

"When ACS was founded, we had a vision of becoming a best-in-class company by working harder than our competitors. More than 20 years and 74,000 employees later, as the world's top BPO company, we have now found a partner to help us reach even greater heights," said Darwin Deason, founder and chairman of ACS who said he intends to remain a long term investor.

Xerox said it will grow ACS's business in Europe, Asia and South America.