Xerox appeals decision blocking Fujifilm deal as CEO returns

NEW YORK: Xerox Corp on Friday appealed a New York court ruling to block its deal with Fujifilm Holdings, just hours after the company announced that its ousted CEO and directors would remain in place.
Xerox said its entire board and management team would stay, as the agreement to oust them reached with dissenting shareholders Darwin Deason and Carl Icahn expired late on Thursday.
Xerox’s changing its mind on the settlement was “extraordinary and highly unusual,” said Guhan Subramanian, a professor at Harvard’s law and business schools who served as an expert witness for Xerox in the litigation.
Officially, Xerox and the activists said the agreement had expired over last-minute issues that arose in negotiations with the judge overseeing the case that made the parties unable to finalize their settlement ahead of a self-imposed deadline on Thursday.
A source familiar with the matter said Xerox’s board let the settlement expire because it came to believe it had flexibility to renegotiate a deal with Fujifilm.
Xerox’s board also took into account that the company’s shares had fallen more than 10 per cent since it announced its settlement with the activists.
The judge said in a hearing on May 3 that he was not prohibiting Xerox from exploring other transactions with Fujifilm, according to a court transcript. In fact, Xerox has already started renegotiating its deal with Fujifilm, according to the source, who did not want to be identified because the matter is private.
The companies are discussing adding $5 a share to the $2.5 billion special cash dividend of roughly $9.80 per share that Xerox shareholders would receive as part of the deal, the person said.
The two companies could also come up with a new structure all together, the person added.
Fujifilm declined to comment on the negotiations on Friday, which were first reported by The Wall Street Journal.
Xerox and Fujifilm agreed in late January to a $6.1 billion deal that would merge the US printer and copier maker into Fuji Xerox, an existing joint venture between Xerox and Fujifilm.
A New York court temporarily blocked the transaction last week, saying that Xerox Chief Executive Officer Jeff Jacobson was “hopelessly conflicted” and that he sought to conclude the deal even though he was advised to end negotiations.
In its appeal on Friday, Xerox disputed the court’s findings that the board breached its fiduciary duties in approving the deal and said the board unanimously authorized the deal.
Meanwhile, Deason and Icahn, who own about 15 per cent of the company, have vowed to keep fighting Xerox, and will nominate a slate of directors at the company’s upcoming annual board meeting. — Reuters