Fujifilm Buys Controlling Stake In Xerox, Creating An $18 Billion Printer Industry Behemoth


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Fujifilm Holdings Corporation has entered into a deal that combines Xerox with Fuji Xerox, creating an $18 billion industry juggernaut that has the potential to shift the balance of power in the intensely competitive printer market.

Under the definitive agreement, Xerox will cede a 50.1 percent stake in the U.S. printer and copier giant to the Japanese document solutions powerhouse, the companies said Wednesday.

[Related: Partners: Potential Xerox Deal With Fujifilm Could Be A Competitive Boon To Both Sides]

The deal, which has been approved by the boards of directors at Xerox and Fujifilm, combines Xerox with Fuji Xerox, a longstanding joint venture agreement between the two. Xerox CEO Jeff Jacobson has been tapped to lead the newly formed entity, which will also be named Fuji Xerox.

Fuji Xerox will continue to be traded on the New York Stock Exchange, with dual headquarters in Norwalk, Conn., and Tokyo. The new board of directors will feature seven Fujifilm appointees and five Xerox-appointed independent directors. Fujifilm Chairman and CEO Shigetaka Komori will serve as chairman of the board.

"The proposed combination has compelling industrial logic and will unlock significant growth and productivity opportunities for the combined company, while delivering substantial value to Xerox shareholders," Jacobson said in a prepared statement. "The new Fuji Xerox will be better positioned to compete in today’s environment with truly global scale, increased presence in fast-growing markets, and innovation capabilities to effectively meet our customers’ rapidly evolving demands."

Reuters is reporting that as a result of combining Xerox with legacy Fuji Xerox, Fujifilm is planning to cut 10,000 jobs at the Asia Pacific-focused joint venture entity amid a "tough market environment." The Tokyo-based company will book restructuring costs of $450.95 million, according to the report.

The deal is expected to close in the second half of 2018 pending the approval of Xerox shareholders, who will receive a $2.5 billion cash dividend ($9.80 per share) as part of the agreement. Xerox was trading up $0.83 (2.54%) to $33.51 per share before markets opened Wednesday.

Major Xerox investors Carl Icahn and Darwin Deason have already publicly voiced their displeasure with the proposed agreement after the two sides were reportedly engaged in talks earlier this month.

Icahn supporter Jonathan Christodoro resigned from the Xerox board of directors, citing disagreement with other board members over Xerox's strategic direction. Icahn, who owns more than 9 percent of the company, followed that by teaming up with Deason – Xerox's third-largest shareholder – and calling for Jacobson's removal as CEO.

Icahn has previously said that Jacobson, chairman Bob Keegan and other "old guard" members of the Xerox board have failed to recognize that further change is needed.

Xerox partners who spoke with CRN earlier this month believed the agreement, if reached, would tighten an already longstanding relationship between the two companies. Troy Tafoya, president of Fort Collins, Colo.-based Professional Document Solutions, said the combination of Xerox's ConnectKey software with Fuji's strong A3 and A4 device lines could help Xerox from a competitive perspective.

"If they're more tied at the hip, they're going to have more control over them not putting devices in competitors' hands," Tafoya said. "I think it's a good thing. Xerox is going in the right direction. I like the products they have, and a lot of those products are from Fuji."

Patrick Leone, founder and CEO of Bloomington, Ind.-based MidAmerica Technology and developer of the SignMe app, said he thinks the addition of Fuji or another potential buyer would be an exciting component in Xerox's go-to-market model.

"I would hope the innovative thinking of the partners is valuable to Fuji," Leone said. "It's going to be a big year for apps and partners building on Xerox's app platform. I would think that would be a big positive for Fuji."

Martin Wolf, president of martinwolf M&A Advisors, said earlier this month that a Fujifilm-Xerox deal makes sense following the Conduent spin-off, which split Xerox with its business services division. By doing that, he said Xerox and Conduent have better positioned themselves for such a deal.

"In the areas they're in, scale matters a lot. It wouldn't surprise me," Wolf said of Xerox. "They haven't been managed for a long time to optimize shareholders. Over the last period, their results have been very mixed at best. That's why you see [Icahn] in there. He has a history of identifying underperforming assets and agitating for change and getting results."

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