John Visentin, the new CEO of Xerox, has written a letter to Shigetaka Komori, chairman of Fujifilm, calling the lawsuit for $1 billion damages that Fujifilm has filed against Xerox “a desperate, misguided negotiating ploy to save a takeover that – as a result of the surreptitious actions of your team – to this day remains enjoined by order of the New York State Supreme Court.”
Visentin references Xerox’s belief that the accounting scandal that rocked the Fuji Xerox joint venture in recent years justifies terminating the agreement to sell Xerox to Fujifilm, stating: “Xerox legally and justifiably terminated the Share Subscription Agreement in accordance with that contract’s unambiguous termination provisions following a number of clear material breaches by Fujifilm.”
He goes on to call Fujifilm a “bad actor” in this respect, saying: “Fujifilm, as 75% owner and controlling partner of Fuji Xerox, has concealed from Xerox the true extent of a massive and ongoing accounting fraud at Fuji Xerox caused by Fujifilm’s own gross mismanagement. The mismanagement and resulting accounting fraud have weighed heavily on our dealings and have cost us both a significant amount of time and money. Along the way, there were multiple material breaches by Fujifilm and/or Fuji Xerox of important provisions contained in the Share Subscription Agreement and the various Fuji Xerox joint venture agreements that have made clear your lack of good faith.”
Visentin makes it clear that Xerox is not looking for a new proposal to salvage the deal that was announced back in January, noting that the deal has been blocked by a New York court ruling.
He points out that the Technology Agreement that underpins the Fuji Xerox joint venture will expire in 2021 and that Xerox will not renew it. Instead, he says that Xerox is now starting to source products from other suppliers in a clear attempt to break away from Fujifilm and will start to sell products directly into the Asia Pacific market after 2021.
Essentially, this represents a ratcheting up of the tension between the two companies – it’s hard to see any real winners in this situation.