Fujifilm files $1bn suit against Xerox
Tuesday, June 19, 2018
The increasingly bitter feud between Fujifilm and Xerox has ramped up a notch with Fujifilm filing a $1bn (£760m) lawsuit against Xerox for damages over the collapse of the proposed merger.
The suit was filed with the federal court for the southern district of New York in Manhattan, US, yesterday (18 June). In the court papers, Fujifilm accused Xerox of breaking its agreement by making a unilateral decision to terminate the merger without “legitimate cause”.
The $6.1bn (£4.5bn) merger centred around Fujifilm transferring its 75% stake in the Fuji Xerox joint venture to Xerox, in exchange for 50.1% stake in Xerox. Fujifilm would then also pay a debt-funded $2.5bn 'special dividend' to Xerox shareholders to reflect their reduced shareholding in the new, merged business.
Agreed in January, the deal was called off last month as a direct result of interventions led by activist Xerox investors Carl Icahn and Darwin Deason. Fujifilm blasted the Xerox board for taking decisions "inconsistent with shareholder democracy" as the pair only had a 15% minority stake in Xerox.
Fujifilm defended the merger of Fuji Xerox and Xerox as "the only correct solution to provide shareholders of both companies with exceptional short- and long-term value". The filed complaint attributed Xerox's change of heart over the merger to “external pressures” and described Xerox as “subject to the whims” of Icahn and Deason.
It said: "Xerox has recently been subject to the whims of activist investors Carl Icahn and Darwin Deason, who, notwithstanding their minority ownership of Xerox shares, have yanked the Xerox Board in more directions than can be counted.
"This includes a game of musical chairs in the Xerox boardroom, which announced several changes to its composition in just the first two weeks of May 2018.
"At present, however, undoubtedly due to Icahn’s and Deason’s influence, the Xerox board has decided to attempt to back out of the transaction, abandoning the deal its directors unanimously approved in January because they believed it would maximise value for Xerox shareholders."
Responding to PrintWeek, Xerox declared its commitment to “vigorously defend” its decision to pull out of the merger due to “accounting issues” at Fuji Xerox.
In response to the suit, a Xerox spokesperson said: “We remain extremely confident that the former board correctly exercised its clear contractual right to validly terminate the transaction agreements due to, among other things, the continuously expanding unresolved accounting issues at Fuji Xerox.
“Xerox will vigorously defend its decision and pursue any and all remedies available to Xerox arising from Fujifilm’s mismanagement and misconduct. The Xerox board of directors is committed to driving the best path forward to maximize value for shareholders.”
In the suit, Fujifilm is also seeking a declaration that Xerox owes it a $183m (£139m) termination fee.
Yesterday, PrintWeek reported that, according to a report in the New York Post, Fujifilm was expected to turn to a judge to enforce the merger deal. In response to PrintWeek late last night, a Fujifilm spokesperson said the report in the New York Post was "not true".