Xerox and Tektronix have announced an agreement under which Xerox will pay $950 million in cash for Tektronix's Colour Printing and Imaging Division.

Xerox will institute a new business unit, adding Tektronix's colour-printing technologies to Xerox's existing black-&-white workgroup printer divisions. Tektronix's printer operations will remain based at the company's headquarters in Wilsonville, Oregon, and Xerox plans to blend its own colour-printer operations, based in Webster, New York, with Tektronix's.

Tektronix's 2,400 colour-printer division employees will become Xerox employees once the transaction is completed - within two months, according to the companies. Gerry Perkel, president of Tektronix's Colour Printing and Imaging Division, is expected to become president of the Office Printing Business in the Xerox Channels Group.

Both companies expect the acquisition to help Xerox become Hewlett-Packard's strongest competitor in office colour printing. Tektronix's Phaser colour laser and solid-ink printers racked up close to $725 million in sales last year, according to the companies, and Xerox's distribution capacity is expected to rise to more than 16,000 resellers and dealers around the world - almost double the current number.

Tektronix's net proceeds from the sale are expected to be between $700 million and $750 million. Some of that will be used to pay off debts, with the rest to distributed among shareholders via share buybacks or a special dividend.