By Jo Francis, Monday 14 May 2018
Carl Icahn and Darwin Deason have emerged victorious in the war over control of Xerox – the proposed takeover deal with Fujifilm is now off and Xerox CEO Jeff Jacobson will be replaced by John Visentin. However, Fujifilm has disputed the decision and is reviewing its legal position.
In the latest extraordinary turn of events surrounding the on-off takeover saga, Xerox announced yesterday evening (13 May) that it had reached a further settlement agreement with activist investors Carl Icahn and Darwin Deason.
As a result, the $6.1bn (£4.5bn) takeover deal previously agreed with Fujifilm has been canned, and six members of the Xerox board have resigned including Jacobson and chairman Robert Keegan.
New CEO Visentin had been earmarked by headhunters as a replacement for Jacobson last year, and his background includes executive roles at two firms that have been named as potential purchasers of Xerox: HP and venture capital firm Apollo Global Management.
He has been working for Icahn Enterprises as a consultant since March.
Xerox said the deal that would have combined Xerox with Fuji Xerox was being terminated due to various factors including “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.”
However, Fujifilm responded by questioning the legality of the move.
A spokesperson said: “Fujifilm disputes Xerox’s unilateral decision to terminate the transaction. We do not believe that Xerox has a legal right to terminate our agreement and we are reviewing all of our available options, including bringing a legal action seeking damages."
Fujifilm said it would urge the new board of Xerox to reconsider.
"We also regret to learn that the new Xerox board is attempting to deprive its shareholders of the opportunity to vote on a transaction designed to create substantial value to be gained from a combination of Xerox and Fuji Xerox and decide for themselves the future of their company. We note that this action was taken by a board, the control of which was taken from the rest of its shareholders by a minority holding just 16% of outstanding shares pursuant to a settlement agreement that was entered into in violation of our agreement.”
In a statement, Xerox said: “Over the past several weeks, the Xerox board has repeatedly requested that Fujifilm immediately enter into negotiations on improved terms for a proposed transaction. Despite our insistence, Fujifilm provided no assurance that it will do so within an acceptable timeframe. The Xerox board believes that the transaction cannot reasonably be expected to be completed under these circumstances, particularly given the court’s injunction of the transaction and the lack of shareholder support for the transaction on current terms, as well as the unresolved accounting issues at Fuji Xerox.
It said the decision to terminate the deal was in the best interests of the company, in light of the potential instability and disruption that would be caused by a drawn-out disagreement over the future for the business.
Keith Cozza, currently CEO of Icahn Enterprises, is set to be the new chairman of Xerox.
The other new board members are Visentin, Jonathan Christodoro, Nicholas Graziano, and Scott Letier.
Existing board members Gregory Brown, Joseph Echevarria, Cheryl Krongard and Sara Martinez Tucker remain in post.
Icahn said the agreement marked “a new beginning” for Xerox, while Deason said the company would now be positioned “to conduct a true, robust strategic alternatives process”.
Xerox’s share price had climbed to $30.18 at the end of last week. The 52-week high is $37.42, low: $27.18.