Xerox Axes $6 Billion Fujifilm Sale, Shuffles Leadership

Xerox Axes $6 Billion Fujifilm Sale, Shuffles Leadership

Xerox Corp XRX.N has scrapped a planned $6.1 billion deal with Fujifilm Holdings Corp 4901.T in a settlement with activist investors Carl Icahn and Darwin Deason that also hands control of the USA photocopier giant to new management.

Icahn and Deason own 15% of the United States tech firm.

It said it still believes the takeover is "the best option created to allow the stockholders of both companies to share the enhanced future value of the combined company".

Xerox also replaced five directors as part of a board reshuffle. Keith Cozza is expected to be named Chairman of the Board.

In a statement on its website, Xerox cited "material deviations" in the audited financials of an existing joint venture known as Fuji Xerox that is controlled by Fujifilm.

The Xerox board said it repeatedly asked Fujifilm in recent weeks to start new talks about improving the terms of the takeover but the Japanese company "provided no assurance that it will do so within an acceptable timeframe".

Xerox said it believes that the transaction can not reasonably be expected to be completed under the circumstances, particularly given the court injunction and that shareholders didn't support it on current terms, as well as unresolved accounting issues at Fuji Xerox.

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The original deal sought to merge Xerox with a joint-venture Fujifilm operated entity, providing Fuji with majority control.

Fujifilm was quick to take a combative stance, saying it disputes Xerox's right to terminate the deal and would look at all options including legal action seeking damages.

Helping Icahn and Deason's case was a court decision in late April that temporarily blocked the planned merger with Fujifilm.

Under the terms of the merger Fujifilm would have held 50.1 percent of Fuji Xerox while current shareholders would have received a special cash dividend of $2.5 billion. He had also been a candidate under consideration by the old board to replace Jacobson as recently as past year, according to court documents.

"Fujifilm will urge the Xerox board of directors to reconsider their decision", the Tokyo-based company said Monday in an emailed statement. We have often said that the most important person at a company (by far) is the CEO.

Xerox said its new board would meet immediately and "begin a process to evaluate all strategic alternatives to maximize shareholder value".

Icahn and Deason had in late April won a temporary injunction against the merger after a NY judge agreed the deal prioritized the interests of the Xerox CEO over that of the company's shareholders.