Icahn and Deason emerge as victors as Fuji Xerox deal collapses.
The on again, off again, on again, off again, $6.1 billion acquisition of Xerox by Fuji Xerox is finally a dead deal. The news was announced over the weekend after Xerox reached a settlement with activist investors Carl Icahn and Darwin Deason.
In a press release issued this morning by Xerox, the company announced that, at 5:00 p.m. ET on May 13, 2018, it notified Fujifilm that the previously announced transaction agreement to combine Xerox with Fuji Xerox is being terminated in accordance with its terms due to, among other things, the failure by Fujifilm to deliver the audited financials of Fuji Xerox by April 15, 2018 and the material deviations reflected in the audited financials of Fuji Xerox, when delivered, from the unaudited financial statements of Fuji Xerox and its subsidiaries provided to Xerox prior to the date of the Subscription Agreement and taking into account other circumstances limiting the ability of the Company, Fujifilm and Fuji Xerox to consummate a transaction.
With that notification, Xerox entered into a new settlement agreement with Carl Icahn and Darwin Deason. The settlement agreement resolves the pending proxy contest in connection with the company’s 2018 Annual Meeting of Shareholders and Deason’s litigation against Xerox and its directors. According to a Xerox press release, it does not affect any claims of Deason or other Xerox shareholders against Fujifilm for aiding and abetting.
Under the terms of the settlement agreement, the following occurred:
- Xerox appointed five new members to its Board of Directors: Jonathan Christodoro, Keith Cozza, Nicholas Graziano, Scott Letier and John Visentin.
- Gregory Brown, Joseph Echevarria, Cheryl Krongard and Sara Martinez Tucker will continue to serve as members of the Xerox Board of Directors.
- Robert J. Keegan, Charles Prince, Ann N. Reese, William Curt Hunter, and Stephen H. Rusckowski each resigned from the Board of Directors of Xerox.
- Jeff Jacobson resigned from his role as Chief Executive Officer and as a member of the Board of Directors of Xerox.
Subsequent to joining the Xerox Board of Directors, Keith Cozza, the Chief Executive Officer of Icahn Enterprises L.P., is expected to be appointed as the new Chairman of the Board of Directors of Xerox, and John Visentin is expected to be appointed as the Vice Chairman and new Chief Executive Officer of Xerox.
As part of the agreement, Xerox and Carl Icahn will withdraw their respective nominations of any other director candidates for election at the 2018 Annual Meeting of Shareholders. Xerox will continue to waive the advance notice bylaw to enable any Xerox shareholder to provide notice of intent to nominate directors for election at the 2018 Annual Meeting of Shareholders until June 13, 2018. The 2018 Annual Meeting of Shareholders will be postponed to a later date.
The new Board of Directors plans to meet immediately and, among other things, begin a process to evaluate all strategic alternatives to maximize shareholder value.
While this announcement seems to signal once and for all that the drama of the past few months has reached its conclusion, Fujifilm announced that it disputes the decision made by Xerox and is looking at available options, including legal action and seeking damages.
This was ugly. And now that this part of the story is over, what’s next for Xerox will be fascinating to watch. Icahn and Deason are intent on selling, but as financial analysts and various sources in the business press are speculating, their options may be limited. Some seem to think that a deal with Fujifilm is still a possibility. Not everyone though. There’s an interesting article on the collapse of the deal in The Washington Post with the writer observing that the deal not happening is a lucky break for Fujifilm . Read that here.
We’re not going to speculate about the future of Xerox other than to say that the changes to top management and to the Board of Directors look like they’ve been made to better position the company to sell. We don’t think new management or Icahn and Deason are looking at much beyond that. Whether or not the change in leadership will impact what’s happening on the technology side of the business or the dealer community who sell Xerox products remains to be seen. We believe it will be status quo for now.
From a personal perspective, we’ve had the good fortune to get to know former CEO Jeff Jacobson during the past two years and he will be missed. He was always a pleasure to speak with at Xerox events and we sincerely hope he’ll be back somewhere in the imaging industry.
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