By Jaspreet Singh and Aditya Soni

(Reuters) – Office equipment maker Xerox has agreed to buy Chinese-owned printer and printing software maker Lexmark International in a $1.5 billion deal to expand its presence in Asian markets and better compete in an industry turned upside down by the digital age.

The purchase of Ninestar, PAG Asia Capital and Shanghai Shouda Investment Center will return Lexmark to US ownership. Formed out of IBM in 1991, Lexmark was sold to a group of Chinese investors in a $3.6 billion deal in 2016.

Xerox, a global household name, has posted five consecutive quarters of revenue declines as demand for printing equipment soared and it faced stiff competition from HP and Canon.

Its shares, which have fallen more than 50% this year, rose 7% on Monday.

Lexmark, which is already a supplier to Xerox, will strengthen its presence in the A4 color printing segment, one of the few expanding areas in an industry facing challenges due to the shift to digital documents.

The combined company is expected to serve more than 200,000 customers in 170 countries and have a market share among the top five companies in the world in various printing segments.

Xerox expects the deal to be immediately accretive to profits and provide more than $200 million in annual cost savings by helping to reduce marketing and real estate expenses, among others.

“This money can be reinvested for the future. Xerox has prepared for the future,” said Zeus Kerravala, principal analyst at ZK Research.

In 2020, Xerox had made a $35 billion hostile bid for HP before the COVID-19 pandemic derailed its plans. Since then, its market value has shrunk to about $1 billion from about $8 billion that year.

Xerox expects to finance the Lexmark deal, which is likely to close in the second half of 2025, with cash on hand and debt. To help with financing, it is cutting the annual dividend to 50 cents per share from $1.

The company said it does not expect any regulatory challenges to the deal, which would need approval from countries including China.

(Reporting by Jaspreet Singh in Bangalore; Editing by Shilpi Majumdar)