$2.3B for Xerox as Fuji venture ends
Fujifilm Holdings is ending its bid to acquire Xerox, dropping a $1 billion lawsuit it filed after billionaires Carl Icahn and Darwin Deason balked at deal terms and won a proxy battle for control of the Xerox board.
In conjunction with the agreement, Xerox announced it would divest to Fujifilm its minority stake in Fuji Xerox, a joint venture extending more than a half century that controlled the sale of cobranded office equipment in the Asian region, and which is a major patent holder in its own right. A supply relationship will remain intact between Xerox and the joint venture. Fujifilm will take over the Xerox International Partners joint venture that sells parts for lowend printers sold previously in the United States and Europe.
Xerox calculated at $2.3 billion the total proceeds it will receive in the agreement, which remains subject to the approval of regulators in Japan. Xerox stated it will use the infusion to pay off
$550 million in debt due next month and to fund future acquisitions, with the company’s chief financial officer confirming to investment analysts last week that Xerox is considering both “large and tuckin” deals in his words. Xerox recently adopted a new holding company structure, changing its formal name to Xerox Holdings Corp.
The Fujifilm dispute had its antecedents in the final months of
2017 when former Xerox CEO Jeff Jacobson negotiated the $6 billion sale of Xerox to Fujifilm, with the Xerox board signing off on the deal under former chair Bob Keegan in a transaction that would have shifted control of the Norwalkbased icon overseas.
Deason sued in New York state court to block the deal, having become a major Xerox stakeholder after its $6.4 billion acquisition of his Texas company Affiliated Computer Services in a 2010 deal completed during the tenure of Jacobson’s predecessor Ursula Burns.
Concurrent with the Deason lawsuit, Icahn launched a successful campaign to take over the Xerox board. As Jacobson’s replacement, he and Deason installed Greenwich executive John Visentin, who previously led the Stamfordbased Novitex spinoff of Pitney Bowes’ print services division, known today as Exela Technologies.
Icahn had vowed from the beginning to pull Xerox out of the Fujifilm joint venture, arguing Xerox is well equipped to go it alone selling in the AsiaPacific region and retain all resulting revenue and profits. The companies established Fuji Xerox has a 5050 joint venture in 1962, with Fujifilm increasing its stake to 75 percent in 2001.
In a conference call with investment analysts last week, Visentin and Xerox CFO Bill Osbourn gave no hint of the pending agreement, while noting improved results at Fuji Xerox had contributed favorably to Xerox’s own results in the third quarter.
Visentin added that Xerox is bracing for an increased impact from the tariff war between the United States and Canada.
“While we are taking actions to mitigate the impact ... such as raising prices on certain products, at this time we are estimating approximately (a) $24 million cost impact from tariffs in 2019, with a significant portion occurring (now),” Visentin said.
Since May 2018 when Icahn consolidated control of the company and installed Visentin, Xerox shares are up 30 percent, including a 6 percent increase Tuesday that pushed the stock above $36.60 in afternoon trading, its highest level in nearly five years.
Over the first nine months of this year, Xerox profits were up 140 percent from the same stretch in 2018 to $542 million. The company is in the midst of a massive restructuring dubbed “Project Own It” that has jettisoned thousands of jobs through outsourcing agreements, layoffs and leaving positions unfilled as workers take better job offers in the economic expansion.