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Report: Xerox CEO Pursued Fujifilm Deal Despite Board Telling Him To Halt Negotiations

After the Wall Street Journal report Sunday, Darwin Deason, the third-largest holder of Xerox shares, filed an update to his lawsuit against the merger with comments from the story.

Xerox CEO Jeff Jacobson reportedly pursued the company's $6.1 billion deal to merge with Fujifilm Holdings after the Xerox board of directors told him to halt such discussions, according to a Sunday story in The Wall Street Journal.

After the publication of the story, the third-largest holder of Xerox shares, former solution provider and current venture capital investor Darwin Deason, Monday filed an update to his lawsuit against the merger with comments from the story.

The Journal Sunday reported that Xerox told Jacobson in November to end discussions with Fujifilm because the company was considering firing him. However, Jacobson continued pursuing the merger deal, one that would leave him in charge of Xerox. Xerox eventually kept Jacobson on as CEO because of his improved performance with the company, the Journal said.

[Related: 10 Things You Need To Know About Fuji Xerox]

Jacobson had full support from Fujifilm during the negotiations, and asked Fujifilm to make it clear to Xerox Chairman Robert Keegan that they wanted Jacobson to be CEO and to be involved in the merger agreement, the Journal said.

The Journal story was included in its entirety in the new April 16 lawsuit update by Deason. In addition, several parts of the Journal story were highlighted in context to the long-running dispute that Deason and fellow activist investor Carl Icahn have had with Xerox over the merger.

Keegan, in a statement released by Xerox late Sunday night, said he believes Deason's litigation distorts many of the facts in the proposed Fujifilm-Xerox merger, and that Xerox will vigorously defend itself in legal proceedings.

"Xerox’s Board of Directors followed a comprehensive process in reaching its decision to approve the proposed transaction, including a comprehensive review of the company’s strategic and financial alternatives, as well as potential transaction structures and negotiations with Fujifilm over a ten-month period. Xerox CEO Jeff Jacobson was fully authorized to engage in discussions with Fujifilm and Fuji Xerox on the proposed combination," Keegan said in the statement.

Tokyo-based Fujifilm Holdings Corporation and Norwalk, Conn.-based Xerox on Jan. 31 unveiled a plan under which Xerox would cede a 50.1-percent ownership stake to Fujifilm in a deal creating an $18 billion printing giant.

Deason in February filed the original version of his lawsuit against Xerox and its board of directors against the merger, alleging that the deal was the result of a "lock-up" agreement made between the two companies in 2001 that was "fraudulently concealed" from investors.

The two companies have had a joint venture, Fuji Xerox, since 1962.

In the lawsuit, Deason claimed that certain updated terms of the Fuji Xerox joint venture agreed to in 2001, when Fujifilm increased its ownership in the joint venture to 75 percent, were not disclosed to investors. In that lawsuit, Deason said those terms preclude "a transparent and fair process for the potential sale of Xerox."

Deason has long ties to Xerox and its channel. He founded Affiliated Computer Services, a solution provider with a focus on IT services and business process outsourcing, in 1988, and in 2010 sold it to Xerox for $6.4 billion.

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