Icahn chalks up win as Xerox scraps Fujifilm deal

By BLOOMBERG

NEW YORK • Activist investors Carl Icahn and Darwin Deason prevailed in their bid to stymie Fujifilm Holdings Corp’s US$6.1 billion (RM24.1 billion) takeover of Xerox Corp and to push out the US office equipment supplier’s CEO.

Jeff Jacobson, the CEO who oversaw the initial deal with Fujifilm, will step down under a settlement backed by the two shareholders, Xerox said in a statement on Sunday.

Keith Cozza, the CEO of Icahn Enterprises, will become chairman, while John Visentin is expected to take over as CEO, the US copier company said. Icahn and Deason own a combined 13% of Xerox.

The agreement leaves the two activist investors with a firmer handle on the company after a tumultuous boardroom battle. Icahn and Deason, who opposed the transaction from the start as undervalued, must now find other bids or compel Fujifilm, which owns 75% of an office equipment joint venture (JV) with Xerox, to raise its offer substantially.

Deason sued Xerox in February to block the proposal, accusing Jacobson of acting without authoridation to strike a deal that preserved his job at shareholders’ expense. The lawsuit also claimed that the company’s board breached its fiduciary duties.

As part of a deal proposed in January, Xerox was to have first merged with a JV it operates with Fujifilm in Asia, and then the Tokyo based company would take over slightly more than 50% of the combined entity.

Fujifilm yesterday said it “disputes Xerox’s unilateral decision” and is “reviewing all of our available options, including bringing a legal action seeking damages”. The company also said it will urge Xerox’s board to reconsider the settlement with Icahn and Deason.

As part of the agreement with the activist investors, Xerox pushed out five board members and added five new ones, including Cozza and Visentin, according to the company’s statement on Sunday.

Fujifilm shares gained 1.6% as of the close in Tokyo trading yesterday, giving the company a market value of US$20 billion. Xerox closed 2.9% higher at US$30.17 last Friday in the US for a market capitalisation of US$7.7 billion.

“It’s not bad for Fujifilm that Xerox ended the deal,” Tomoichiro Kubota, a market analyst at Matsui Securities Co said by phone. “From the beginning, the market was not accepting the deal as a good one since they don’t see big growth potential in Xerox.”

The Japanese company’s shares are down 6.5% this year, partly as investors balked at the company’s plan to take on more of Xerox’s business within the office-equipment industry. The company has been acquiring drug and biomedical assets to diversify as demand for copiers stagnates.

Separately, Fujifilm said it’s acquiring the stakes it doesn’t already own in drugmaker and distributor Toyama Chemical Co from Taisho Pharmaceutical. Toyama Chemical will be combined with its Fujifilm RI Pharma unit effective Oct 1, Fujifilm said in a statement yesterday.

Nikkei earlier reported Fujifilm was expected to acquire the stake for as much as ¥70 billion (RM2.53 billion).

“We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm,” Icahn said.

“With that behind us and new shareholder- focused leadership in place, today marks a new beginning for Xerox.”