Icahn, Deason Reject Xerox Peace Offering, Denounce Leadership

In the latest development in the battle between the Xerox Board of Directors and activist investors Carl Icahn and Darwin Deason, both of whom together own approximately 15 percent of total Xerox shares and who oppose the proposed Fujifilm deal announced in January, have penned a new letter to Xerox shareholders. The letter is in response to a Xerox letter to shareholders published earlier this week (see “Xerox to Negotiate More Favorable Fujifilm Deal.”)

The two first allege that the Xerox board refuse to admit that they considered alternatives to the Fujifilm deal, which would entail a complicated transaction in which Fujifilm would purchase Xerox for $6.1 billion, and Xerox would be merged with Fuji Xerox, its decades-old joint venture with Fujifilm. Current Xerox CEO Jeff Jacobson would be CEO of the new merged company.

Icahn and Deason also allege that the board repeatedly demanded an $18 million “golden parachute” for Jacobson, who would have resigned his position as CEO as part of a proposed settlement announced last week. The proposed settlement has since expired, and Jacobson, as well as other Xerox board members who would have resigned under the settlement, are back on the job.

They also allege that the Xerox letter posted this week is nothing more than “an unconscionable attempt to deny clear documentary evidence proving that these directors have consistently put their own interests ahead of Xerox and its shareholders.”

The Icahn/Deason letter posted today, states that the Xerox board made the following  “misleading claims:”

  • Claim: The proposed Fuji transaction was the result of a “’robust strategic review process’ in which the Xerox Board ‘engag[ed] with multiple third parties to assess potential transactions.’
  • Reality: The court’s evidentiary record shows that the process was anything but ‘robust.’ As Centerview’s David Hess testified under oath, the Xerox Board never asked Centerview to actively or broadly shop the Company. In fact, the Xerox Board only permitted Centerview to reach out to two financial sponsors and one potential strategic acquirer, and neither Centerview nor Xerox ever engaged in any meaningful substantive discussions with any of them. Perhaps most shameful is the fact that the Xerox Board never even modeled or analyzed the economic implications of any potential transactions with any strategic acquirers.


  • Claim: The Xerox Board was advised by ‘a team of experienced legal and financial advisors.
  • Reality: The Xerox Board was advised (and continues to be advised) by a team of self-interested legal and financial advisors. Take Centerview for example. Less than a week before the proposed transaction with Fuji was signed, Centerview raised multiple red flags about the deal, including that financial due diligence of Fuji Xerox remained incomplete, the financial projections did not create enough value for Xerox shareholders and the purported premium to Xerox shareholders was ‘made up.’ But just a few days later, Centerview issued a fairness opinion, for which they received $10 million, and they will receive an additional $40 million if the deal closes. Not surprisingly, all of Xerox’s advisors sought broad releases from liability when we discussed settling the pending proxy fights.


  • Claim: We have ‘targeted management and the Board with personal, unsubstantiated attacks.
  • Reality: There is nothing ‘unsubstantiated’ about our criticisms of Jeff Jacobson and the rest of the Xerox Board. In fact, our ‘attacks’ are based on a review of hundreds of thousands of pages of documents, 50+ hours of sworn testimony and two full days of evidentiary hearings, all of which is publicly available. That record was painstakingly reviewed by a well-respected judge who spent over 40 years in private practice at one of the most prestigious law firms in the world, and he concluded that the explanations from these directors were “counter-intuitive and not credible.’ This lack of credibility is not at all surprising – recall that this is the same board that just last week unanimously approved a settlement agreement whereby seven directors (including Jeff Jacobson) would resign, and then backtracked on that agreement 48 hours later.


  • Claim: The Xerox Board ‘remain[s] entirely focused on doing what is best for the company and all of its shareholders.
  • Reality: Nothing could be further from the truth – the primary concerns of these directors has been their own compensation, potential liability and reputations. For instance, in exchange for agreeing to resign last week, they repeatedly demanded that Jeff Jacobson be awarded an ~$18 million golden parachute and that the other directors have their outstanding equity awards vested and paid out immediately.


  • Claim: The Xerox Board will reopen the window for nominating directors for election at the 2018 annual meeting because they ‘believe it is imperative that all shareholder voices are heard.
  • Reality: The Xerox Board will reopen the window for nominating directors for election at the 2018 annual meeting only because the Supreme Court of the State of New York has forced them to. Before an injunction was entered by the court, the Xerox Board had categorically refused to reopen the window.


  • Claim: The Xerox Board ‘continu[es] to explore options to maximize shareholder value.
  • Reality: The Xerox Board continues to stand in the way of real value creation. The agreements governing the proposed transaction with Fuji, which this Board approved, include a  ‘no-shop’  that prohibits Xerox and its advisors from even speaking with competing bidders and a perpetual match right in favor of Fuji, which effectively eliminates the prospect that any competing bidder will approach the company. We – on the other hand – have been approached by pretty much every major financial sponsor, and they have all expressed interest in Xerox. But none of them are willing to invest the resources necessary to fully diligence the opportunity until the proposed Fuji deal is terminated, the risk of having to pay a $180 million break-up fee to Fuji is eliminated and the existing directors – each of whom they know already has one foot out the door – are replaced.”

The letter continues: “The Xerox Board is delusional. If you listen to them, the court is wrong, the company’s largest shareholders are wrong, the analysts are wrong and the corporate governance experts are wrong. Only they – in their infinite, benevolent wisdom – know what’s best for us and our company.

We have heard from many of you – our fellow shareholders – that Xerox is not returning your calls. We urge you to continue your attempts to contact the Xerox Board and request that they immediately terminate the proposed deal with Fuji and then resign and make way for a new conflict-free, shareholder-focused board of directors.”

Xerox’s Side of the Story

The Xerox board’s side of the story is, as stated in its letter published earlier this week, of course dramatically different from Icahn and Deason’s accusations, stating in its letter this week that it will seek to renegotiate the proposed Fujfilm deal, under which Xerox shareholders would receive $28 per share (Icahn and Deason have said they are “open” to $40 or more per share). The board has also deferred to Deason in the past – when Xerox was split into two companies, Xerox and Conduent, Xerox agreed to Deason’s wishes, and transferred his shares in Xerox to Conduent, as Deason demanded.

Finally, the board has argued that all Xerox shareholders should be able to have a voice concerning the proposed Fujfilm deal – not just Deason and Icahn – and should be able to vote on it.  The board also stated that various Xerox shareholders appear to have been concerned about an Icahn/Deason regime at Xerox, which would have occurred if the settlement had gone through, and that these shareholders were “extremely adverse” to the settlement, now since expired.

Xerox is currently appealing a New York State Supreme Court decision temporary injunction that blocks the proposed Fujifilm deal. The injunction was issued in response to a lawsuit filed by Deason that seeks to block the deal and also enable him to nominate members to the Xerox board.

Our Take

“Tell me Darwin, where’s the money?” Nom, nom, nom.

More Resources

%d bloggers like this: