A bid to merge its document business with R.R. Donnelley & Sons Co. was privately rejected by Xerox Corp recently, reported The Wall Street Journal citing sources and people familiar with the matter.

Splitting its business-outsourcing operations from its legacy printer and copier division, the plans for the division of Xerox being broken up into two businesses was announced in January this year. Quoting people familiar with the matter, the news paper claims that Xerox has drawn some interest in potential deals since the announcement of the break up as is often the case with such breakups.

The people told the US newspaper that interest in putting its operations together with Xerox’s remaining copier business was expressed by R.R. Donnelley which itself is also in the process of breaking up.

One of the sources was quoted as saying that with Xerox getting a slight premium, a so-called Morris Trust, a tax-efficient set-up, was proposed to be set up by the suitors through a deal and structure the merger based on sucha  trust functioning and management. The sources said that in addition to several hundred million dollars in new cost cuts, the R.R. Donnelley proposal called for its executives to take control of the operations and the new trust.

The sources also confirmed to the Journal that believing its own plan is less risky, R.R. Donnelley was told by Xerox on Thursday that it wasn’t interested in a deal after the Xerox board reviewed the proposal with its advisers.

Sliding up a total of 4.6% since it announced plans to split in January, Xerox stock closed Thursday at $9.65. on the other hand there has been a total uptick of 6.3% in the shares of R.R. Donnelley since announcing its own separation in August and the news reports that it was in talks with Xerox earlier this week helped the stock rise this week to close at $18.62 on Thursday.

With the naming new chief executives for both its divisions in June, the Norwalk, Conn. based Xerox has been plowing ahead with its plans for separating the businesses by the end of the year. The slower-growing documents business would be headed and looked after by insider Jeff Jacobson who is being promoted. This division would retain the Xerox name.

The services business of Xerox is to be named Conduent Inc. and Ashok Vemuri was hired to be the CEO of the new services division. Ursula Burns, the current Chief Executive, has been named as the chairman of the documents company

While continuing to be on the board of the split-off documents business, last month the Xerox management board agreed to let activist investor Carl Icahn place his own director on the board of the company with immediate effect. Mr. Icahn has already been promised three seats at the business-services company when that is spun out and the latest allowed board member in the document business would be in addition to the three seats already promised. Mr. Icahn is the largest Xerox holder and owns a 9.8% stake in the company.

Splitting up into a financial-communications and data-services business has been announced by Chicago-based R.R. Donnelley.

(Adapted from The Wall Street Journal)