KKR to Buy Bulk of Xerox Insurance Business for $2.7 Billion

Xerox Corp. said Thursday that it agreed to sell the bulk of its insurance business to a group of investors for $2.7 billion, ending its attempt to diversify into financial services.

The Stamford, Conn.-based copier and office products company said it is selling the rest of Talegen Holdings Inc., its property and casualty insurance group, to investors led by Kohlberg Kravis Roberts & Co. of New York and current management.

The sale, expected to close by midyear, ends Xerox’s nearly three-year effort to unload its troubled insurance businesses. The ill-fated diversification strategy dated from the early 1980s.

Company executives and analysts said the sale will remove what had become a major distraction for Xerox management and a burdensome debt from the company’s balance sheet.

Investors applauded the move. Xerox stock jumped $3.25 to close at $139.875 on the New York Stock Exchange.

Xerox said it will take a $1.5-billion charge for the recently ended fourth quarter to reflect a loss of about $975 million on the sale and another $525 million to strengthen Talegen’s cushion for losses against future claims.

The company said payment for Talegen will include $1.45 billion in cash, $450 million in preferred stock in a new company formed by the KKR group, the assumption of $360 million in debt and $462 million in other compensation.

Xerox also said that in a separate deal, it will sell the rest of First Quadrant Corp., an asset-management company, to Affiliated Managers Group for an undisclosed amount.