Xerox Shareholders to Take Aim at Fuji Xerox Contract Provisions for Xerox Sale

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While Xerox’s proposed Fujfilm deal appears to be dead at this point, and litigation against the Xerox board of directors is ended, a law firm representing Xerox shareholders – Bernstein Litowitz Berger & Grossmann LLP – yesterday issued a statement that litigation may be in store for Fujifilm – in part to break provisions of the Fujifilm-Xerox joint contract for Fuji Xerox that may hinder the sale of Xerox.

The law firm represents Xerox shareholders that include lead plaintiffs consisting of the Asbestos Workers Philadelphia Pension Fund, Carpenters Pension Fund of Illinois, and the Iron Workers District Council of Philadelphia & Vicinity Benefit & Pension Plan.

The law firm notes that while the agreement announced on May 13th blocks the proposed sale of a majority stake in Xerox to Fujifilm and includes the resignation of a majority of the Xerox Board’s directors and its CEO, litigation may still be in store for Fujifilm

The law firm noted that the May 13th deal doesn’t resolve pending claims against Fujifilm, which New York State Supreme Court Justice Barry Ostrager found to have likely “aided and abetted the (Xerox) board’s breaches during the original, conflicted deal.”

Although the proposed deal won’t move forward, the law firm states that “Fuji will continue to face substantial litigation risk for its conduct, as the new Xerox Board attempts to find an alternative suitor for Xerox or renegotiate a better deal with Fuji.”

The firm notes that Fujifilm and Xerox currently operate a decades-old joint venture, Fuji Xerox, that manufactures and distributes Xerox products in the Asia-Pacific region. As revealed when Xerox and Fuji announced the proposed transaction back in January 2018, the contracts governing the Fuji Xerox joint venture contained “previously undisclosed change-of-control provisions that created complications for any sale of Xerox to other strategic acquirors.”

By refusing to dismiss their claims against Fujifilm, the law firm states that the Xerox shareholder lead plaintiffs aim to secure a more level playing field for all bidders of Xerox and to help ensure that “Fujifilm will not take further actions to disadvantage Xerox’s shareholders for its own benefit.”

The law firm also stated that the “litigation and subsequent termination surrounding the tainted deal should have long-lasting legal implications, strongly encouraging boards to insure negotiations with potential buyers are conducted by non-conflicted parties.”

Mark Lebovitch, a partner with Bernstein Litowitz, commented: “It took months of aggressive litigation to provide Xerox shareholders with the fair and open sales process they were entitled to all along. This settlement clearly shows the value that can be created when determined investors and their counsel act decisively to challenge corporate misconduct.”

“We are optimistic that conditions have now been created that will enable a new value-maximizing transaction for Xerox shareholders to be achieved,” added James Sabella, a director at Grant & Eisenhofer.

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