Fujfilm May Walk Away from Xerox Deal

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Last week, Fujifilm filed a lawsuit in New York State Supreme Court seeking to lift an injunction that blocks a Xerox shareholder vote on Fujiflm’s purchase of Xerox, but this week, the Tokyo-based company said that it might walk away from the complex deal which would see it purchasing Xerox for $6.1 billion – a deal Xerox scrapped last month.

According to Bloomberg, Fujifilm Chief Executive Shigetaka Komori said today: “it may have no choice but to abandon a $6.1 billion merger with Xerox Corp if there is no progress in talks with the U.S. firm’s new board for about half a year.”

“I don’t have a specific deadline in mind, but it should normally be from several months to six months. If we have nothing by then, it can’t be helped,”  Fujifilm’s Komori said in his first media session since Xerox scrapped the deal. A spokeswoman later clarified that this meant Fujifilm could end merger talks.

Fujifilm Chief Executive Shigetaka Komori

Xerox ended the deal last month in a settlement with activist investors Carl Icahn and Darwin Deason, who together own about 15 percent of Xerox shares, and who opposed the takeover by Fujifilm, saying it undervalued Xerox. The two have stated that they would be open to offers of $40 or more per share for Xerox, with Xerox currently trading at about $27 per share, and about $29 per share before Xerox scrapped the Fujiflm deal.

Komori said Fujifilm is “opposed to considering any new proposal from the new Xerox board if it’s beneficial for both firms, but that the $40 share price sought by Icahn and Deason is “too high.”

The typical premium offered in buyout deals is 30 percent but that would not be possible in this case, Komori said.

“We could procure funds, but many shareholders are demanding that money should be used on healthcare businesses,” he said.

The copier business makes up about half of Fujifilm’s revenue and operating profit. The firm has been seeking growth through buying businesses involved in regenerative medicine, skincare, and pharmaceuticals.

According to the Nikkei-Asian Review, Komori also said that the now-scrapped deal, which entails the merger of Xerox with Fuji Xerox, Xerox’s decades-old joint venture with Fujiflm, would be the best path forward for Xerox: “When I thought of the best way to maximize the corporate value of Xerox, the takeover was the only choice, and I still think this plan is the one and only way,”

Komori also said the deal would lead to long-time shareholder value: “The current shareholders will be able to enjoy a share price reflecting the synergy of the merger.” Referring to Ichan and Deason’s ownership of about 15 percent of Xerox shares, he noted: “It is up to other 85 percent of shareholders to decide.”

Fujifilm Lawsuit

Last week, Fujiflm filed a lawsuit in New York State Supreme Court, seeking to overthrow an injunction that blocks Xerox shareholders from voting on Fujfilm’s acquisition of Xerox, and the merger of Xerox with Fuji Xerox, with Fujifilm obtaining a 50.1 percent controlling interest in the new merged company.

Fujifilm’s filing stated: “In violation of a valid contract that they unanimously authorised, the Xerox directors decided to secure these self-interested releases by means of a settlement with Deason that included the purported termination of a transaction that those same directors had repeatedly supported both publicly and under oath only weeks earlier.”

Fujifilm said it would also file legal documents on June 14th “that it will use to vindicate its rights in light of Xerox’s wrongful termination of the Shareholders Subscription Agreement.”

The firm argued that “radically changed circumstances since” a judge’s ruling in April that blocked the $6.1 billion sale of Xerox to Fujiflm  “provide a separate basis to terminate the injunction as to all parties, not just the Xerox Defendants.”

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