Xerox caves again over Fuji deal

Xerox appears to have abandoned its efforts to sell itself to Fujifilm and settled its differences with two of its major individual shareholders, Darwin Deason and Carl Icahn. Or maybe not. Who knows? We’ve been here before. Maybe this time the agreement will hold up?

Jeff Jacobson, former CEO of Xerox.

But for now it appears that Xerox has gone further than the deal that it announced earlier this month. The company has already told Fujifilm that the proposed deal to merge Xerox with Fuji Xerox is now history though Fujifilm has said that it is still considering its own legal position. But realistically there is little chance that Fujifilm can force Xerox into this deal.

Jeff Jacobson has resigned, again, both as CEO and as a member of the board. Robert Keegan, who was the chairman of the board, has also resigned along with four other board members, including Charles Prince, Ann Reese, William Curt Hunter, and Stephen Rusckowski.

In their place, Xerox has appointed five new board members, including Jonathan Christodoro, Keith Cozza, Nicholas Graziano, Scott Letier and John Visentin, all of whom broadly back Icahn and Deason’s position.

John Visentin will take over as the CEO, as well as the vice chairman of the board. Keith Cozza, who is the CEO of Icahn Enterprises, will be the new chairman of the Board of Directors.

Four of the existing board members – Gregory Brown, Joseph Echevarria, Cheryl Krongard and Sara Martinez Tucker – will continue in their roles. Deason has dropped his lawsuit and both Icahn and Deason have pledged to give up their efforts to appoint any other directors.

Xerox will continue to waive the advance notice bylaw so that any other Xerox shareholders will be able to nominate directors for election at this years shareholders meeting until June 13, 2018 – the date for the actual shareholders meeting itself, which was originally scheduled for this month, has not yet been set.

The new Board of Directors plans to meet immediately and, among other things, begin a process to evaluate all strategic alternatives to maximize shareholder value, which presumably means exploring the options that Icahn has already set out – namely to exploit Xerox’s existing intellectual property.

Xerox issued a statement largely blaming Fujifilm for not coming back with a better deal, adding: “The Board also considered the potential instability and business disruption during a proxy contest. Absent a viable, timely transaction with Fujifilm, the Xerox Board believes it is in the best interests of the company and all of its shareholders to terminate the proposed transaction and enter a new settlement agreement with Icahn and Deason. Under the agreement, the Xerox Board will be reconstituted to determine the best path forward to maximize value for Xerox shareholders.”

Carl Icahn also released his own statement, saying: “We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm. With that behind us and new shareholder-focused leadership in place, today marks a new beginning for Xerox. We have often said that the most important person at a company (by far) is the CEO. We are therefore also pleased that John Visentin, a tried and true veteran in this area, will be taking the helm.”

So for now it appears that Deason and Icahn have finally triumphed over Jacobson and Keegan. In truth, it’s hard to imagine any other outcome given the legal decision blocking the deal with Fujifilm, and the crown jewel lock-in of the Fuji Xerox arrangement, which would make it hard for anyone else to buy the company.

However, this is by no means over – the public arguments have exposed the weakness in Xerox’s position. And, of course, there is still the outstanding issue of the existing Fuji Xerox joint venture, which Icahn has said Xerox should abandon.

Deason still has an outstanding lawsuit against Fujifilm for aiding and abetting the former Xerox directors in selling the company. Fujifilm has said that it would seek compensation so it seems likely that the two companies will come to some arrangement to compensate Fujifilm, terminate the Fuji Xerox joint venture and end this final lawsuit.

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