Further twist in Xerox takeover saga

The Xerox-Fujifilm saga has taken yet another twist – Xerox’s board remains in place after the settlement agreement expired yesterday, to the fury of dissident shareholders Darwin Deason and Carl Icahn.

The settlement, which would have seen CEO Jeff Jacobson, chairman Robert Keegan, and five other board members resign, expired yesterday evening.

In a statement Xerox said: “As previously stated, the agreement would have become effective upon execution of stipulations discontinuing the Deason litigation with respect to the Xerox defendants. In the absence of such stipulations, the agreement expired at 8:00pm.”

Deason and Icahh reacted with a further open letter to Xerox shareholders. They said the Xerox board had not permitted the agreement to take effect, “once again intentionally violating their fiduciary duties to Xerox shareholders by pursuing their own brazen self-interest”.

“This inexplicable turn of events occurred for one reason only: the Xerox board recklessly refused to follow through with the leadership and governance changes we agreed to, demanding unprecedented additional approvals for their own personal self-interest,” they stated.

“An expansive release from us and the company was not enough. Fully insured, robust indemnification rights were not enough. The Xerox board declined to take the actions they unanimously approved as in the best interest of Xerox shareholders unless they obtained additional unprecedented protections from the court, which all parties (and the judge!) agree are not required under applicable law.”

Deason and Icahn pledged to hold the relevant Xerox directors “fully and personally liable” over the coming months. “Similarly, we intend to see that Fujifilm is held fully liable as an aider and abettor of the continuing breaches of fiduciary duties by those directors,” they said.

Amid the ongoing furore, Xerox also released its Q1 results this week. Overall sales in the three months to 31 March were effectively static, slipping by 0.8% to $2.44bn (£1.8bn). Sales were down 4.6% on a constant currency basis. The operating margin was 10.4% (Q1 2017: 11%).

Sales of high-end production printing equipment fell by 5.2% to $92m. Mid-range equipment sales were more or less static at $334m.

The accounting scandal at the New Zealand and Australia operations of joint venture Fuji-Xerox, in which Xerox has a 25% stake, also resulted in a further $28m charge related to Xerox’s share of the resulting correction of the adjustments and misstatements that were identified.

Xerox said that its board of directors recognised the uncertainty caused by the recent developments surrounding the takeover row. “The Xerox board and management team remain focused on driving continued improvement in financial and operational performance, and will consider all options to create value for the company and its shareholders,” it stated.

Xerox’s share price was at $32.31 earlier this week but has since slipped back to $28.28. (52-week high: $37.42, low: $27.18).

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