Fujifilm Wins Appeal, Will Pursue Xerox


Fujifilm Holdings has won its appeal of a New York state court decision that blocked it from pursuing a merger with Xerox, according to court filings.

The New York State Appellate Court on Tuesday overturned the preliminary injunction that had stopped the $6.1 billion merger of the two companies. Fujifilm celebrated the news in a statement and said it hoped to renew merger talks with Xerox.

“We are very pleased with the New York State Appellate Court’s decision, which ends the lawsuit against Fujifilm in its entirety and validates our position that Fujifilm acted properly and negotiated with Xerox at arms’ length for the transaction that was unanimously approved by the Boards of both companies,” the company said. “The Court’s decision will allow us to discuss with Xerox the fulfillment of the original agreement.”

[RELATED: Fuji Scoffs At Xerox Plan To Go It Alone In Asia]

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The injunction had been won in April by activist investor Darwin Deason – who along with Carl Icahn owns 15 percent of Xerox. In his lawsuit, Deason claimed members of the Xerox board as acted in bad faith during their dealings with the Fujifilm. However, the appellate court disagreed.

“Plaintiffs failed to show bad faith or a disabling interest on the part of the majority of the directors of Xerox such that plaintiffs' actions stood a likelihood of success on the merits,” the court ruled. “The board, which engaged outside advisors and discussed the proposed transaction on numerous occasions prior to voting on agreeing to present it to the shareholders, did not engage in a mere post hoc review, nor was the transaction unreasonable on its face. In light of the foregoing, the business judgment rule does apply.”

In the April 27 ruling that was overturned yesterday, New York State Court judge Barry Ostrager called then Xerox CEO Jeff Jacobson “hopelessly conflicted” owing to Jacobson finagling a spot as CEO of the combined company should a merger with Fuji go through. Appellate court judges found nothing untoward in Jacobson’s actions.

“To the extent former CEO of Xerox, Jacobson, was conflicted, inasmuch as the transaction provided that he would serve as the future CEO of the new company, the conflict was acknowledged; he neither misled nor misinformed the board,” the court wrote in its ruling.

In its statement yesterday, Fujifilm did not mention the pending $1 billion dollar federal lawsuit it filed June 18 against Xerox after the merger fell through in mid May.

The deal, which became public in January, would have seen Xerox sold to Fujifilm for a cash dividend to shareholders of $2.5 billion. Xerox would then own 49.9 percent of the new company, but the controlling interest would go to Japan.

Icahn and Deason — who own a combined 15 percent stake in Xerox — rebelled at those terms, then waged a four-month long public relations battle that ultimately landed in court. After the April court victory, Jacobson and the board began negotiating a surrender to Icahn.

That finally happened on May 13. Under the terms of that deal the lawsuits brought against Xerox by Deason was dismissed, Jacobson resigned, and five members of the Xerox board also stepped down. Icahn loyalist John Visentin has since taken over as Xerox CEO.

Fujifilm maintained in their statement that the deal should be decided by all of the shareholders, not just the largest two.

“All Xerox shareholders ought to be able to decide for themselves the operational, financial, and strategic merits of the transaction to combine Fuji Xerox and Xerox,” their statement reads.

Xerox and Icahn did not respond last night to requests for comment.