It was widely reported earlier this month that Fujifilm and Xerox were talking about some kind of a deal and this has now come to fruition with the two companies agreeing that Xerox will be merged into the Fuji Xerox joint venture, with Fujifilm as the majority owner with 50.1 percent.
The remaining 49.9 percent will be held by Xerox shareholders, who will also receive a $2.5 billion special cash dividend, or approximately $9.80 per share. Fujifilm won’t hand over any cash, effectively using its 75 percent stake in Fuji Xerox to fund the deal. This values the acquisition as $6.1 billion.
The new company will continue to be called Fuji Xerox. For now, the Xerox and Fuji Xerox brands will continue in their respective Western and Asian markets. It will continue to be listed on the New York stock exchange and will maintain headquarters in both the US and Japan. The new company will maintain Xerox’s current $1.00 annual dividend per share and commitment to return at least 50 percent of free cash flow to shareholders.
Jeff Jacobson will continue as chief executive officer of the new Fuji Xerox, despite the calls for his resignation which largely prompted Xerox to look around for a deal such as this one. Shigetaka Komori, chairman and chief operating officer of Fujifilm, will become chairman of the board and Fujifilm will nominate seven out of the 12 directors of the company.
The new company should have total annual revenues of $18 billion. There will be roughly $1.4 billion in one-time integration and restructuring costs, mainly in the first three years. But the company should be able to realise at least $1.7 billion in total annual cost savings by 2022, with approximately $1.2 billion of the total cost savings expected to be achieved by 2020. Much of the cost savings will come from job losses, with Fujifilm announcing some 10,000 job cuts.
Komori said, “Fujifilm and Xerox have fostered an exceptional partnership through our existing Fuji Xerox joint venture, and this transaction is a strategic evolution of our alliance. The Document Solutions business represents a significant part of Fujifilm’s portfolio, and the creation of the new Fuji Xerox allows us to more directly establish a leadership position in a fast-changing market. We believe Fujifilm’s track record of advancing technology in innovative imaging and information solutions – especially in inkjet, imaging, and AI areas – will be important components of the success of the new Fuji Xerox.”
Fuji Xerox was originally set up in 1962 as a 50/50 joint venture but Fujifilm has owned 75 percent since 2001. The great irony here is that Xerox originally entered into the Fuji Xerox joint venture to gain better access to the Asia Pacific market, with Xerox firmly in the driving seat developing the technology. But in recent years Fujifilm has developed much of the technology and now Fujifilm has effectively bought Xerox to gain better access to the American market.
Of course, the real issue will be how long it takes for Fujifilm to get a grip on Xerox. The original Fuji Xerox has been a rare, successful long lasting partnership but taking over the whole shop will be quite a stretch. Also, although this deal make the new Fuji Xerox one of the largest providers of office document printers, this sector is declining as more documents are digitally handled nowadays. Xerox has good inkjet technology in Impika but it will take some restructuring for Fujifilm to make the most out of this. That said, Fujifilm has acquired quite a few companies in recent years and has proven good at taking its time to integrate them fully.
The deal won’t close until the second half of this year, subject to the usual regulatory approvals.