Xerox had mafe the plan of $6.1 billion deal with Fujifilm Holding Corporation in a settlement with active investors namely Carl Icahn and Darwin Deason that also handed its control of the U.S. photocopier company to a new management.
The victory of the Investors has put the Japanese company at negotiations with Xerox, although it is by no means out of contention as Xerox is now expected to go up for sale in an auction at a higher price.
Over several weeks, Xerox had been repeatedly asking Fujifilm to immediately start talks about improved terms for a proposed transaction.
On the decision of dropping the deal, the U.S. company said, “Despite our insistence, Fujifilm provided no assurance that it will do so within an acceptable timeframe.”
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 Asia joint venture Fuji Xerox and given Fujifilm control. That prompted Icahn 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, however, reported that they are unhappy with the current structure of the joint venture.
Moreover, the settlement is creatinh uncertainty concerning potential changes to a business that accounts for nearly half of Fujifilm’s revenue.
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.
Fuji Xerox is 75 percent owned by Fujifilm. The venture handles contracts that supply global clients with Xerox services in the United States and Europe, and Fuji Xerox services in Asia.
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 Chief Executive Officer Jeff Jacobson – the main architect of the deal with Fujifilm – as well as five other directors step down. John Visentin 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.
Icahn said, “We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm.”