FUJIY FUJIFILM Holdings Corporation (PK)

By Cara Lombardo 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 14, 2018).

Xerox Corp. said it will back out of its merger deal with Fujifilm Holdings Corp. as it reached a new settlement with two of its biggest shareholders, the latest twist in a monthslong tug of war over the future of the iconic American company.

The printer and copier company said it reached a settlement to replace its chief executive and overhaul its board after it ended a plan to combine with its joint venture with Fujifilm. This is Xerox's second settlement with activist shareholders Carl Icahn and Darwin Deason; the company had earlier struck a deal with the two billionaires to oust Chief Executive Jeff Jacobson and flip the board, but that agreement abruptly expired earlier this month before receiving court approval.

The new settlement marks a win for Messrs. Icahn and Deason, who agreed to table their proxy fight after several months of drama. They opposed the plan to combine with the joint venture Fuji Xerox, arguing it undervalued Xerox, and had planned to run their own slate of directors for Xerox's board.

Xerox appointed five new members to the board and five existing members resigned, in addition to Mr. Jacobson. One of the new members, Icahn Enterprises CEO Keith Cozza, is expected to be chairman.

Now the new Xerox board, the majority of which is made up of directors backed by the activists, will immediately begin examining strategic alternatives. Messrs. Icahn and Deason have said Xerox could be sold to a competitor or private-equity firm.

As part of the settlement, John Visentin will replace Mr. Jacobson as chief executive, the company said Sunday. Mr. Visentin is a former executive at several technology companies and had been working with the activist investors at Xerox.

Xerox said it opted to back out of the deal with Fujifilm because the Japanese company didn't deliver Fuji Xerox's audited financial statements by April 15, and there were material deviations in the audited financials when compared with the unaudited financials.

Fujifilm didn't immediately respond to a request for comment.

Xerox in January struck the complex merger deal with Fujifilm, which would have traded Xerox's 25% ownership of their 60-year joint venture to Fujifilm for 49.9% of a new company that combines all of Xerox with the joint venture. Xerox shareholders would also have been paid $2.5 billion in aggregate via a special dividend.

Messrs. Icahn and Deason have been seeking to kill the merger, and Mr. Deason had filed a lawsuit against it, alleging Mr. Jacobson raced to seal the deal to protect his own job. Documents and communications disclosed in the suit showed the Xerox board in November had nearly replaced Mr. Jacobson with Mr. Visentin, and that it had told Mr. Jacobson to halt negotiations with Fujifilm. Instead, Mr. Jacobson struck the deal.

Xerox had said it chose to keep Mr. Jacobson after performance improved, that Chairman Robert Keegan had agreed he could keep negotiating, and that the whole board backed the deal.

In late April, a judge temporarily blocked the deal, saying the transaction was negotiated by a "massively conflicted" Mr. Jacobson and that he was looking out for his own interests over those of Xerox shareholders.

After the judge blocked the deal, Xerox reached its first settlement with the activists, but it expired after 48 hours.

Mr. Deason will drop the portions of the lawsuit against Xerox and its directors as part of the latest settlement, Xerox said, but he will continue pursuing claims against Fujifilm that it aided and abetted breaches of fiduciary duty by Xerox directors.

--David Benoit contributed to this article.

Write to Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

May 14, 2018 02:47 ET (06:47 GMT)

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