Fujifilm and Xerox create new industry giant

Jo Francis
Wednesday, January 31, 2018

Fujifilm and Xerox have agreed an industry mega-merger that will see Xerox become part of an enlarged Fuji Xerox, with Fujifilm holding a majority stake in the new entity.

The move comes just a year after Xerox split into two separate companies, and follows a period of intense pressure on the business with Xerox's largest shareholders calling for a change of leadership, and strategy, at the company.  

Speculation earlier this month that Fujifilm and Xerox could be working on a deal was confirmed today (31 January), with the announcement that Xerox will be combined with Fuji Xerox to create a new $18bn turnover (£12.7bn) business.  

Shareholders in Xerox will receive a $2.5bn cash dividend as a result of the deal and will have a 49.9% stake in the new entity, with Fujifilm holding a majority 50.1% stake. 

Xerox had sales of $10.3bn last year, while Fuji Xerox had revenues of $9.6bn. The two companies have run the joint venture for 56 years. Fujifilm currently has a 75% stake in Fuji Xerox.

The two companies said the new Fuji Xerox would leapfrog rivals Canon and Ricoh in terms of printing revenues, and will be a close second to HP in terms of scale. It said the potential addressable market was approaching $120bn. 

Major UK users have welcomed the potential upsides of the deal for customers. Jeremy Walters, chief executive of Paragon Customer Communications, said: "This can only be a good thing for innovation, and we look forward to continuing our good relationship with Xerox." 

Xerox chief executive Jeff Jacobson will become CEO of the new Fuji Xerox organisation, which will be a subsidiary of Fujifilm. Fujifilm chairman and CEO Shigetaka Komori will be chairman of Fuji Xerox. The company will have dual headquarters in the US and Japan, and the Xerox and Fuji Xerox brands will continue in the operating regions, as now.  

Komori described the deal as "a strategic evolution of our alliance". He said: "We believe Fujifilm's track record of advancing technology in innovative imaging and information solutions – especially in inkjet, imaging, and AI areas – will be important components in the success of the new Fuji Xerox." 

Jacobson, who has been on the receiving end of harsh personal criticism from high-profile investor Carl Icahn, said the combination of the two businesses "has compelling industrial logic and will unlock significant growth and productivity opportunities for the combined company, while delivering substantial value to Xerox shareholders". 

Icahn had not commented on the takeover news at the time of writing. 

One industry expert commented: "This seems to be a decent solution, with Xerox getting control over Fuji Xerox to streamline sales and R&D. Xerox to remain listed in the US and Jeff Jacobson as CEO – but with control from Fujifilm. But of course we need to see how this pans out." 

Zerographic Systems group sales director Mike Holyoake, who was formerly head of Xerox UK's graphic business, said: "I can only see positives in this news. The marriage of the two hopefully throws a few more R&D dollars into the piece, and a meeting of intelligent minds can only be positive for the future. It will be interesting to see how it pans out across Europe and North America." 

Expected synergies include cost savings of $1.7bn, with $1.2bn to be achieved before 2020. Fujifilm has also just announced that it plans to cut 10,000 jobs, at least a fifth of the total workforce, at Fuji Xerox in the Asia Pacific region due to declining photocopier sales.  

Fujifilm's Graphic Systems business, which includes printing plates and inkjet printing, is in a separate business unit to the Fuji Xerox document imaging operation.  

The transaction is subject to shareholder and regulatory approval and is expected to complete in the second half of this year.  

Xerox also announced its Q4 and full-year 2017 results today. Sales in Q4 were down 2% on a constant currency basis at $2.7bn, and the firm filed a loss of $196m following a $400m non-cash charge related to a US tax act that was implemented in December. However, the company said its operating results reflected "meaningful improvements in revenue, operating margin, and earnings". Full year sales were down 4.7% at $10.3bn.  


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