On 18 April 2018, The Wall Street Journal and Bloomberg updated their reports on lawsuits by Xerox’s biggest and third biggest investors Carl Icahn and Darwin Deason to block the takeover of Xerox by Fujifilm. In a somewhat complex deal, Fuji-Xerox would take over Xerox for US$ 6.1 billion. If the deal goes through, it will create a new entity with sales of around US$ 18 billion with Jacobson projected to become chief executive officer of the enlarged business.
Under the terms the companies agreed to in January, Xerox, which has a market value of US$ 7.6 billion, will first merge with the Fuji-Xerox joint venture that the company operates with Fujifilm in Asia. Current Xerox shareholders will receive a cash dividend of US$ 9.80 per share. Tokyo-based Fujifilm will ultimately end up owning 50.1 percent of the combined entity, which expands the joint venture to encompass all of Xerox’s operations.
In the latest legal move aimed at blocking the sale of Xerox to Fujifim, activist investor Darwin Deason alleges that Xerox CEO Jeff Jacobson pursued the deal to protect his own job. Deason added amendments to his lawsuit against Xerox that claim Jacobson continued negotiations with Fujifilm last year even after the Xerox board asked him to stop in November since it was planning to fire him.
Xerox chairman Robert Keegan has refuted these claims by Deason and Icahn, “Xerox CEO Jeff Jacobson was fully authorized to engage in discussions with Fujifilm and Fuji Xerox on the proposed combination . . . . Xerox believes Mr Deason’s litigation distorts many of the facts regarding the proposed combination with Fuji Xerox. Xerox strongly believes that Mr Deason’s lawsuit is meritless and it will vigorously defend itself in legal proceedings.”
A Fujifilm spokeswoman said Deason’s amended complaint “reflects the biased, arbitrary, and inaccurate view of Mr Deason’s attorneys.” She said the Xerox agreement was “negotiated at arms-length between independent parties with the advice of third-party professionals.”
Fellow billionaires Carl Icahn and Deason, who are the largest and third largest shareholders and together control about 15% of Xerox stock, are trying to block the US$ 6.1 billion deal. The amended lawsuit says Xerox Corp’s board told Jacobson in November to stop negotiations with Fujifilm Holdings because it was considering firing him and that Jacobson raced to make a complex deal that would leave him in charge, and cede control of the American icon to the Japanese company.
Together with the revision of the lawsuit, the two activist shareholders have sent another open letter and presentation to shareholders, essentially outlining a plan to “rescue and revitalise” Xerox as an independent US company. They foresee a “brighter, better” future for Xerox as a standalone business based around four key areas: unlocking growth through new adjacent services and partnerships; driving bottom-line cost savings through network consolidation and channel optimisation; monetising untapped intellectual property; and re-evaluating the Asia-Pacific market with a stronger management team. “We believe our plan could create total value of US$ 54 to 64 per share compared to US$ 40 per share in the proposed transaction, while retaining operating control and the prospect of receiving a true control premium in the future.”
In the lawsuit, Deason published text messages purporting to be between Fujifilm’s head of strategy, Takashi Kawamura, and Jacobson. Since shareholder approval is required to effect the deal, the two activist investors renewed calls to shareholders to unseat Xerox board members and block the Fuji deal.