Xerox drops Fujifilm merger plan, strikes a deal with activists

Xerox drops Fujifilm merger plan, strikes a deal with activists

Technology company Xerox has ended its contentious sale to Japan's Fujifilm later attaining a bargain with activist investors Carl Icahn and also Darwin Deason.

Deason and Icahn were also unhappy about a secret 2001 deal between Xerox and Fujifilm which contained a clause that prevented the Xerox board from seeking another buyer, effectively shortchanging the company's shareholders.

Xerox said it was ending the deal with Fuji Xerox partly because Fujifilm had failed to provide audited financial information for Fuji Xerox by an April 15 deadline.

Under the terms of the settlement with the two shareholders, Xerox said it would replace its chief executive, Jeff Jacobson, while making a series of changes to its board of directors. Keith Cozza is expected to be named Chairman of the Board.

The company called on the Xerox board of directors to "reconsider their decision". As part of a deal proposed in January, Xerox would first merge with a joint venture it operates with Fujifilm in Asia, and the Tokyo-based company would ultimately take over slightly more than 50% of the combined entity. "Despite our insistence, Fujifilm provided no assurance that it will do so within an acceptable timeframe".


A similar settlement with Icahn and Deason was announced in early May, but was scuttled a couple of days later when Xerox said certain legal stipulations were not meant.

A representative for Fujifilm wasn't immediately available for comment. Fujifilm has also said it was appealing a USA court injunction blocking the takeover.

The Xerox Board believes that the transaction can not reasonably be expected to be completed under these circumstances, particularly given the court's injunction of the transaction and the lack of shareholder support for the transaction on current terms, as well as the unresolved accounting issues at Fuji Xerox.

Xerox said its new board would meet immediately and "begin a process to evaluate all strategic alternatives to maximize shareholder value". He had also been a candidate under consideration by the old board to replace Jacobson as recently as a year ago, according to court documents. Deason sued Xerox in February to block the proposal, accusing Jacobson of acting without authorization to strike a deal that preserved his job at shareholders' expense. The lawsuit also claimed that the company's board breached its fiduciary duties.

Icahn and Deason have said they would consider an all-cash bid of at least $40 per share.

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