Business

Xerox calls off $6.1bn sale to Fujifilm

Control of company now in hands of activist investors

Xerox fired its chief executive Jeff Jacobson as part of its decision to terminate the deal with Fujifilm.

Mon May 14 2018 - 13:01

Xerox has called off its $6.1 billion (€5 billion) sale to Japan's Fujifilm, after reaching a truce with Carl Icahn and Darwin Deason that ends months of infighting and will hand control of the US company to the activist investors.

The printer and photocopier maker said late on Sunday that its long-time Japanese partner had failed to deliver audited financials, limiting its ability to consummate the transaction.

Xerox’s capitulation to the demands of Mr Icahn and Mr Deason, who together own more than a tenth of the $8 billion company, is a victory for the activist investors. They had criticised the US company’s chief executive and board for entering an agreement with Fujifilm that they said destroyed shareholder value.

Direction

Xerox fired its chief executive Jeff Jacobson as part of its decision to terminate the deal. He will be replaced by former IBM and Hewlett-Packard executive John Visentin, while Keith Cozza of Icahn Enterprises will become chairman of the board.

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In addition, Xerox has appointed a new slate of directors that will give Mr Icahn greater power to control the company’s direction.

“We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm,” Mr Icahn said. “With that behind us and new shareholder-focused leadership in place, today marks a new beginning for Xerox.”

The Xerox board said it had repeatedly requested a new round of negotiations with Fujifilm that might lead to the Japanese group improving its takeover bid. However, it said Fujifilm had “provided no assurance” that it could do so within what the board believed was an “acceptable” amount of time.

“The transaction  cannot reasonably be expected to be completed under these circumstances, particularly given . . . the lack of shareholder support for the transaction on current terms, as well as the unresolved accounting issues at Fuji Xerox,” the board said.

In a statement on Monday, Fujifilm criticised Xerox’s decision to terminate the transaction and called on the board to reconsider.

“We do not believe that Xerox has a legal right to terminate our agreement and we are reviewing all of our available options, including bringing a legal action seeking damages,” Fujifilm said.

Transaction

The transaction, as originally struck, would have seen Xerox merge its business with a joint venture the company operates with Fuji in Asia, handing Fuji majority control. Xerox investors were to receive a $2.5 billion cash dividend as part of the deal.

The Japanese group, which makes digital cameras, copiers and medical equipment, last year revealed that it found improper accounting practices at two subsidiaries of its joint venture Fuji Xerox in New Zealand and Australia since 2010. The accounting scandal prompted both Fujifilm and Xerox to revise their financial results. – Copyright The Financial Times Limited 2018

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