- Xerox shareholders will receive a $2.5 billion special cash dividend, or approximately $9.80 per share, and 49.9 percent of the combined company
- The combined company (Xerox and Fuji Xerox) is expected to deliver at least $1.7 billion in total cost savings, with $1.2 billion to be achieved by 2020
- The new combined company will accelerate a “path to revenue growth through global reach, industry-leading scale and enhanced innovation capabilities”
- The new combined company is said to be “well-positioned to lead in growing business areas such as high-speed inkjet, industrial print and workplace solutions, while leveraging Fujifilm’s extensive technologies
- The new combined company will have” enhanced financial flexibility for future growth investments and capital returns”
- The new combined company will have dual headquarters in Norwalk, Connecticut in the United States, and in Minato in Tokyo, Japan, and will maintain the iconic “Xerox” and “Fuji Xerox” brands within its respective operating regions, and will have a presence in over 180 countries
The new combined company is expected to have annual revenues of $18 billion and leadership positions in key geographic regions.
According to the firms, this proposed merger provides Xerox shareholders with “significant cash at closing, as well as a substantial interest in the significantly enhanced combined company.”
As noted, under the terms of the agreement, Xerox shareholders will receive a $2.5 billion special cash dividend, or approximately $9.80 per share, funded from the combined company’s balance sheet, and own 49.9 percent of the combined company at closing. The cash dividend represents more than 30 percent of Xerox’s unaffected share price of $30.35 based on closing share price as of January 10, 2018.
The combined company will be named “Fuji Xerox” and trade on the NYSE under the ticker XRX. The combined company will go to market and maintain the iconic “Xerox” and “Fuji Xerox” brands within its respective operating regions.
Shigetaka Komori, chairman and chief executive officer of Fujifilm, said, “Fujifilm and Xerox have fostered an exceptional partnership through our existing Fuji Xerox joint venture, and this transaction is a strategic evolution of our alliance. The Document Solutions business represents a significant part of Fujifilm’s portfolio, and the creation of the new Fuji Xerox allows us to more directly establish a leadership position in a fast-changing market. We believe Fujifilm’s track record of advancing technology in innovative imaging and information solutions – especially in inkjet, imaging, and AI areas – will be important components of the success of the new Fuji Xerox.”
Komori added, “I am confident that Fujifilm’s ability to drive change as well as its experience of successful reinvention will give a competitive edge to the new Fuji Xerox, delivering significant value creation to shareholders of both the new Fuji Xerox and Fujifilm. We are delighted to welcome Xerox and its employees to the Fujifilm family and look forward to combining our strengths towards jointly shaping the future of our industry.”
Jeff Jacobson, CEO of Xerox, said, “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. 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. In addition, the combined company’s strong financial profile will enable investments that support continued market leadership, while also providing opportunities for increasing capital returns over time.”
Robert J. Keegan, chairman of Xerox’s Board of Directors, said, “Today’s announcement follows a comprehensive review of our strategic and financial alternatives led by Xerox’s independent directors that began after the separation of Conduent in 2016. Upon careful consideration of all alternatives available to the company, the Board of Directors concluded that this combination is clearly the best path to create value for our shareholders. An attractive, certain cash dividend, together with participation in the future success of the combined company, presents a compelling value equation for Xerox shareholders. We are excited to strengthen our longstanding relationship with Fujifilm as we enter the next phase of Xerox’s transformation journey.”
“Clear Leader in Innovative Print Technologies and Intelligent Work Solutions”
Xerox shareholders will have the opportunity to participate in the new Fuji Xerox’s “accelerated revenue trajectory and long-term value creation potential.” The transaction builds on the 56-year collaborative history between Fujifilm and Xerox to create a global leader in print technologies and intelligent work solutions with enhanced scale and innovation capabilities:
- Global leader with combined revenue of approximately $18 billion and nearly $120 billion total addressable opportunity.
- Enhanced scale with presence in over 180 countries and covering key geographies including North America, Japan, Europe, Asia-Pacific, and China.
- Combined leadership with a strong track record of operational excellence, transformation experience, customer relationships and industry expertise.
- Improved revenue profile and growth trajectory by leveraging the combined expertise, competitive strengths and geographic reach of the two companies.
- World-class innovation capabilities to define the future of innovative print technologies and intelligent work solutions by bringing together two R&D and innovation leaders, along with Fujifilm’s extensive expertise. The new Fuji Xerox will be well-positioned to lead in growing areas such as high-speed inkjet, packaging, industrial print and workplace automation, as well as future development opportunities in artificial intelligence, machine learning, internet of things and augmented reality.
- Strengthened balance sheet and cash flow generation to provide flexibility to support strategic investments in growth and enable increasing capital returns.
Significant Value Creation Opportunity
The companies expect the new company to deliver at least $1.7 billion in total annual cost savings by 2022, with approximately $1.2 billion of the total cost savings expected to be achieved by 2020. The targeted cost savings represent approximately 10 percent of the total cost base of the new Fuji Xerox and will drive significant margin expansion over the next four years.
Of the total $1.7 billion cost savings, $1.25 billion is related to the synergies that the firms say will be achieved through the transaction.
In addition, the combined company will benefit from a cost-reduction program commencing immediately at the existing Fuji Xerox joint venture, which is targeted to generate approximately $450 million of cost savings on an annualized basis. These amounts are incremental to Xerox’s ongoing Strategic Transformation initiatives.
The new company expects to incur approximately $1.4 billion in one-time integration and restructuring costs, mainly in the first three years.
The firms also say that the new Fuji Xerox will also have significant revenue synergy opportunities over time as it capitalizes on its global reach, industry-leading scale and enhanced innovation capabilities. The new combined company will have an increased total addressable opportunity estimated at nearly $120 billion and a strong presence in attractive growth markets, allowing the new company to become more competitive and better able to serve customers and business partners globally.
Leadership and Governance
Upon close of the transaction, Jeff Jacobson will serve as chief executive officer of the new Fuji Xerox.
The combined company’s board of directors will include 12 members, seven of whom will be appointed by the Fujifilm Board. Five independent directors will be appointed from the Xerox Board. Shigetaka Komori will serve as chairman of the board.
- January 2018: Icahn, Deason Call for Xerox CEO, Directors Replacement, Renegotiation of Fuji Xerox Partnership
- January 2018: Deason, Shareholders, Demand Xerox Disclose Potential ‘Value-Destroying’ Fujifilm Deal
- January 2018: Under Pressure from Icahn and Seeking New Growth, Xerox May be Negotiating Deal with Fujifilm
- December 2017: Billionaire Investor Icahn Blasts Xerox Board, Says Xerox ‘Desperately Needs New Leadership’
- December 2017: Carl Icahn to Nominate Four Directors to Xerox Board
- June 2016: Carl Icahn Adds Christodoro to Xerox Board of Directors
- October 2016: Billionaire Investor Deason Files Lawsuit to Block Xerox Split into Two Companies
- October 2016: Xerox Rolls Out New Conduent Brand Logo as it Prepares for Split into Two Companies
- October 2016: Xerox’s BPO Group to Trade as Conduent on NY Stock Exchange Following Split
- November 2015: Billionaire Investor Icahn is Second-Largest Xerox Shareholder; Considering ‘Strategic Alternatives’ for Xerox