Judge blocks Xerox deal with Fujifilm

The Xerox board’s proposal to sell the company to Fujifilm has been dealt a fresh blow by a US court, which has temporarily blocked the sale after hearing a lawsuit brought by Darwin Deason, Xerox’s third largest investor.

Jeff Jacobson, CEO of Xerox, pictured here at the company’s Drupa 2012 press conference.

Deason’s lawsuit alleged that Jeff Jacobson, CEO of Xerox, had pushed through the deal even though he had been advised to end the discussions with Fujifilm.

Justice Barry J Ostrager of the Supreme Court of the State of New York, issued a temporary injunction halting the sale, saying in his decision that Jacobson was “hopelessly conflicted during his negotiation of a strategic acquisition transaction that would result in a combined entity of which he would be CEO.”

The ruling grants Deason’s request to reopen nominations to the board of directors in advance of the next shareholder meeting, which was the main purpose of the action in the first place. Deason had alleged that material changes – namely the terms of the proposed sale to Fujifilm and the revelation of the crown jewel lock of the existing Fuji Xerox joint venture – meant that shareholders should have the right to nominate a full slate of directors to the board. 

Xerox has said that it will appeal the decision, stating: “Xerox disagrees with the court’s ruling to enjoin the shareholder vote on our proposed combination with Fuji Xerox and to waive the advance notice bylaw. The company strongly believes that its shareholders should be allowed to exercise their right to vote on the transaction and decide for themselves. Xerox will immediately appeal the court’s decision.”

Fujifilm added: “We disagree with and are disappointed by the judge’s ruling.” Nonetheless, it appears that the deal is on hold now until the appeals have been heard and a final ruling made. 

Deason said that “the court acted to protect the shareholders of Xerox,” adding: “Beyond that, we still have a lot of value to create at Xerox and I intend to focus my efforts there.”

At the heart of all of this is Jacobson’s plan to sell Xerox to Fujifilm in a deal said to be worth $6.1bn. Deason, together with Carl Icahn, Xerox’s largest individual shareholder, have claimed from the start that this deal did not represent good value for the Xerox shareholders. Xerox had already come under pressure from investors and agreed last week to re-open the negotiations with Fujifilm to seek more favourable terms.

The company added: “Xerox’s Board believes that a combination with Fuji Xerox is the best path forward to create value for the Company and all of its shareholders.”


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