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Xerox abandons planned deal with Fujifilm in victory for Icahn and Deason

Reuters  |  NEW YORK/TOKYO 

By and Makiko Yamazaki

NEW YORK/TOKYO (Reuters) - Corp has scrapped a planned $6.1 billion deal with Holdings Corp <4901.T> in a settlement with activist investors and that also hands control of the U.S. photocopier giant to new management.

The victory for the billionaire investors puts the Japanese company further on the back foot in any new negotiations with Xerox, although it is by no means out of contention as is now expected to go up for sale in an auction at a higher price.

said that it had over several weeks repeatedly asked to immediately start talks about improved terms for a proposed transaction.

"Despite our insistence, provided no assurance that it will do so within an acceptable timeframe," the U.S. firm said in a statement on its decision to drop the deal.

Fujifilm was quick to take a combative stance, saying it disputes Xerox's right to terminate the deal and would look at all options including legal action seeking damages.

The two companies agreed in January to a complex deal that would have merged Xerox into their joint venture and given Fujifilm control. That prompted and Deason, who own 15 percent of Xerox and argued the U.S. firm was being undervalued, to launch a proxy fight.

The activist investors have also said they are unhappy with the current structure of the joint venture, and settlement creates uncertainty concerning potential changes to a that accounts for nearly half of Fujifilm's revenue.

and Deason have said they believe other investors are "waiting in the wings" for Xerox while people familiar with the matter have previously said that buyout firm has expressed interest in a bid for Xerox.


But analysts believe the two firms are inextricably intertwined and that Fujifilm is not without bargaining power, while also doubting that talk of other buyers is that substantial.

"It wouldn't be good if it goes elsewhere. But are there really other potential buyers? Icahn and Deason say there are, because they want a higher price, but you don't really know whether that's for real," said

Fuji Xerox, 75 percent owned by Fujifilm, handles contracts that supply global clients with Xerox services in the and Europe, and services in Moreover, Xerox no longer builds its own office copiers, instead relying mostly on

Xerox said its new board would meet immediately and "begin a process to evaluate all strategic alternatives to maximize shareholder value."

Icahn and Deason have said they would consider an all-cash bid of at least $40 per share. In contrast to the investors' argument that Fujifilm is only offering $28 per share, analysts have said the Japanese firm's offer is not too far off that per share valuation, albeit not in cash.

The settlement will see - the main of the deal with Fujifilm - as well as five other directors step down. is expected to take the helm.

Visentin had previously been hired by Icahn to assist in fighting Xerox. He had also been a candidate under consideration by the old board to replace Jacobson as recently as last year, according to court documents.

It is Xerox's second settlement with the activist investors in just two weeks. The first settlement agreement was allowed to expire as Xerox came to believe it had flexibility to renegotiate a deal with Fujifilm and also took into account a stock dive that followed the agreement.

"We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm," Icahn said in a statement.

Xerox also said it was ending the deal partly because Fujifilm had failed to provide audited financial information for Fuji Xerox by an April 15 deadline and that there were "material deviations" between audited Fuji Xerox financial statements and unaudited statements provided previously.

(Reporting by and Makiko Yamazaki; Additional reporting by in New York, Ritsuko Ando in Tokyo and Imail Shakil in Bangalore; Editing by and Edwina Gibbs)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, May 15 2018. 02:41 IST