Icahn, Deason, Accuse Fujifilm, Xerox CEO of Deceiving Xerox Board

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Xerox shareholder and activist investor Carl Icahn.

Yesterday, activist investors Carl Icahn and Darwin Deason ratcheted-up their campaign to stop the proposed merger of Xerox with Fuji Xerox, under which Fujifilm of Japan would acquire Xerox for $6.1 billion and obtain a 50.1 percent majority interest in a new company that would combine Xerox and Fuji Xerox. Current Xerox CEO Jeff Jacobson would be the CEO of the new combined Xerox-Fuji Xerox. Fuji Xerox has been a joint venture between Xerox and Fujifilm for several decades.

Xerox shareholder and founder of Affiliated Computer Services (ACS), Darwin Deason. In 2010, Xerox purchased ACS, which provided business-processing services, for $6.4 billion. Last year, Xerox split off its business-processing services unit, which it then named Conduent, and which is now a separate company from Xerox.

Icahn and Deason issued a public letter to Xerox shareholders, urging them to vote against the deal; Xerox shareholders will vote on the deal sometime next month.

In the letter, the two investors, who together hold approximately 15 percent of Xerox shares, state that “Both the substance of the proposed value-destroying transaction and the conflict-tainted process by which it was hatched are an insult to long-suffering Xerox shareholders and make a mockery of well-established corporate governance norms.”

They also accuse Fujifilm, along with Xerox CEO Jeff Jacobson, of having been “successful in putting one over on the board of directors of Xerox.”

Alluding to Deason’s amendments to his lawsuit against Xerox leadership and Fujifilm, which charge that Jacobson continued to pursue negotiations with Fujiflm even though the board told him to stop those negotiations and that the Xerox board was trying to replace Jacobson, Icahn and Deason charge in their letter that “before many of the sordid details came to light,” Xerox’s stock price on April 13, 2018 was $28.17 per share, which is about 14-percent below the closing price on the day before Xerox announced the proposed deal with Fujifilm, and “approximately 37-percent below management’s purported deal value of $45.00 per share.”

The two also refer to the remarks of Columbia Law School Professor John Coffee, who alleges: “This is a strange and irregular transaction that is simply not comparable to any other transaction I have seen in over 45 years of observing the ‘merger and acquisition’ marketplace. A CEO of the target, facing likely ouster, serves as the loyal agent of the acquirer, designing a deal that is too good to be true: a cheap price, little governance protections, no market check, and a process that ignores other bidders.”

The two also accuse Xerox of a “shameful attempt to keep hidden from shareholders the many other sordid facts surrounding this unfortunate transaction that are still being concealed due to the machinations of Xerox’s lawyers.”

They conclude by again stating that proposed deal “dramatically” undervalues Xerox and disproportionately favors Fujifilm.

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