Xerox Cancels Fujifilm Deal

Xerox Corp. (NYSE: XRX) has canceled a $6.1 billion takeover by Fujifilm Holdings Corp. The transaction would have ceded control of Xerox to the Japanese company. In its statement, Xerox cited Fujifilm’s failure to provide audited financials for the joint venture on time, among other issues, for the decision to terminate the merger agreement. Xerox said it believes that the transaction cannot reasonably be expected to be completed under the circumstances

In recent weeks, it had become increasingly clear that the deal was in jeopardy. As part of the deal proposed in January, Xerox would merge with a joint venture it operates with Fujifilm in Asia. Fujifilm would then take over slightly more than 50 percent of the combined entity. The companies had planned to cut $1.7 billion in costs over the next several years while cutting thousands of jobs at their joint venture.

Activist investors Carl Icahn and Darwin Deason have opposed the Fujifilm transaction from the start. Together, they own about 13 percent of Xerox. Icahn and Deason had argued that the merger agreement undervalued the company. Deason sued Xerox in February to block the proposal, accusing the company’s board of breaching its fiduciary duties. In a statement, Xerox’s former board of directors said that over the past several weeks, it had repeatedly requested that Fujifilm consider improved terms for the deal.

In its statement, Xerox said, “Absent a viable, timely transaction with Fujifilm, the Xerox board believes it is in the best interests of the company and all of its shareholders to terminate the proposed transaction and enter a new settlement agreement with Icahn and Deason.” Xerox said the settlement with Icahn and Deason resolved a proxy contest set to play out at Xerox’s 2018 annual meeting, originally scheduled for June 13. As part of the settlement, Xerox and Icahn agreed to withdraw their board candidates from the upcoming shareholder meeting, and said the meeting would be postponed.

As part of the agreement, Xerox CEO Jeff Jacobson will step down along with several other board members. Xerox said the departing directors are William Curt Hunter, Robert J. Keegan, Charles Prince, Ann N. Reese and Stephen H. Rusckowski. John Visentin is expected to take over as CEO while Keith Cozza, the CEO of Icahn Enterprises, will become chairman.

The new board members are Jonathan Christodoro, Keith Cozza, Nicholas Graziano, Scott Letier, and John Visentin. The new board of directors plans to meet soon to “begin a process to evaluate all strategic alternatives to maximize shareholder value,” the company said in a statement. Icahn and Deason have said they would be willing to consider any offers for the company of $40 a share or more.

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