Struggling documents company Xerox announced an agreement to merge with Fujifilm before the end of the year — but over the weekend Xerox severed that agreement after disputes with majority shareholders and questions on audited financials for the would-be Fuji Xerox. In an announcement on May 13, Xerox announced the termination of the previously announced merger agreement to create Fuji Xerox. Fujifilm is disputing the end of the agreement and is looking into legal action, saying that Xerox didn’t have the right to terminate the agreement.
After the agreement was announced, investors Carl Icahn and Darwin Deason, who owned a combined 15 percent of Xerox, said the agreement undervalued shareholders by giving Fujifilm a 50.1 percent share in the new company. The two took their disagreement to court and received an agreement in their favor that put a temporary injunction on the deal.
Xerox cited concerns over how that delay would impact the company as one of the factors contributing to the termination of the agreement with Fujifilm. The company also said that Fujifilm did not meet the deadline for providing audited financials per the agreement, and expressed concern over “material deviations” on the audited Fuji Xerox financials.
“Fujifilm disputes Xerox’s unilateral decision to terminate the transaction,” Fujifilm said in a statement. “We do not believe that Xerox has a legal right to terminate our agreement and we are reviewing all of our available options, including bringing a legal action seeking damages.”
By terminating the Fuji Xerox agreement, Xerox settles the case with Icahn and Deason. Included in that settlement is the resignation of Xerox CEO and board of directors member Jeff Jacobson, along with appointing five new members to the board, two of whom BBC News says are close to Icahn.
“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,” the Xerox board of directors wrote in a statement. “Under the agreement, the Xerox Board will be reconstituted to determine the best path forward to maximize value for Xerox shareholders.”
Fujifilm says that Xerox didn’t have the legal right to terminate the merger agreement. “The proposed transaction, including its economic terms, was negotiated at arms’ length based on fair valuations and we continue to believe it is the best option designed to allow the stockholders of both companies to share the enhanced future value of the combined company with Fujifilm. Fujifilm will urge the Xerox board of directors to reconsider their decision,” the company said.
While the agreement is terminated and the legal case settled, that doesn’t change what brought Xerox into considering the Fuji Xerox merger in the first place. Digital alternatives are leaving companies such as Xerox struggling — the Fuji Xerox agreement would have cut the company’s costs by $1.7 billion dollars over four years. Xerox says the board, with the new members, will meet immediately to discuss alternatives to that merger.
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