Fresh foray in Xerox takeover row

By Jo Francis, Wednesday 18 April 2018

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Investors Darwin Deason and Carl Icahn have launched a fresh offensive in their bid to derail Xerox’s proposed sale to Fujifilm, with Deason filing an amended lawsuit as part of an ongoing attempt to stymie the takeover.

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Row over industry mega-merger rumbles on

The duo had already mounted a high-profile campaign against the plans that would see Fujifilm take over Xerox and combine it with existing joint venture Fuji Xerox. In a further flurry of activity, Deason has now filed a revised lawsuit against the Xerox board, while the duo have penned another open communiqué to shareholders.

Some elements of the lawsuit’s contents were redacted in the Xerox SEC filing related to the complaint, because the lawsuit “contains information designated highly confidential”.

The Wall Street Journal reported that the lawsuit claimed that last November Xerox’s board told chief executive Jeff Jacobson to stop negotiations over the deal, because it was considering firing him.

However, Xerox refuted the assertion. In a statement chairman Robert Keegan said: “Xerox believes Mr Deason’s litigation distorts many of the facts regarding the proposed combination with Fuji Xerox. Xerox strongly believes that Mr Deason’s lawsuit is meritless and it will vigorously defend itself in legal proceedings.

“Xerox’s board of directors followed a comprehensive process in reaching its decision to approve the proposed transaction, including a comprehensive review of the company’s strategic and financial alternatives, as well as potential transaction structures and negotiations with Fujifilm over a ten-month period. Xerox CEO Jeff Jacobson was fully authorised to engage in discussions with Fujifilm and Fuji Xerox on the proposed combination.”

If the deal goes ahead it will create a new entity with sales of around $18bn (£12.7bn), with Jacobson set to become CEO of the enlarged business.

Icahn and Deason have also just made public a further open letter and presentation to Xerox shareholders, outlining how they propose to “rescue and revitalise” the Xerox business.

Icahn is Xerox’s largest individual shareholder, while Deason is its third-largest. Both men are billionaires.

In the presentation the duo again rail against the terms of the deal, which they view as being detrimental to the interests of existing Xerox shareholders and described the current process as "conflict-tainted".

They lay out a plan for a “brighter, better” future for Xerox as a standalone business based around four key areas: unlocking growth through new adjacent services and partnerships; driving bottom-line cost savings through network consolidation and channel optimisation; monetising untapped intellectual property; and re-evaluating the Asia-Pacific market with a stronger management team.

“We believe our plan could create total value of $54-$64 per share compared to ~£28 per share in the proposed transaction, while retaining operating control and the prospect of receiving a true control premium in the future,” the duo stated.

Last month Xerox issued an open statement of its own, laying out its vision of the “significant benefits” to shareholders in combining the Xerox and Fuji Xerox businesses.

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