Fujifilm to Xerox: We Will Sell Alone in North America, Europe

The intentional rift (to put it mildly) between Xerox and Fujifilm – which have operated Fuji Xerox for decades as a joint venture – continues to widen, with Fujifilm Chairman and CEO today penning a letter to newly appointed Xerox CEO John Visentin, in response to a letter Visentin had written to him and sent on Monday. In that letter, Visentin had said Xerox won’t renew its Fuji Xerox agreement in 2021, and will instead source products from other sources, as well sell directly sell in the Asia-Pacific region. Visentin also wrote that Fujiflm’s hopes of again coming to a deal involving the sale of Xerox to Fujifilm are “delusional,” and that Xerox had the right to scrap a proposed, complicated deal under which Fujiilm would have purchased Xerox for $6.1 billion, with Xerox being merged with Fuji Xerox.

In the letter Komori sent to Visentin today, Komori highlighted the following:

“It is obvious to objective observers that Xerox’s stated reasons for terminating the transaction with Fujifilm are merely a thinly veiled pretext to bargain for a higher price from Fujifilm at the behest of two minority shareholders (editor: Carl Icahn and Darwin Deason) of Xerox.”

Xerox had stated that it scrapped the proposed deal due to Fujifilm’s alleged failure to correct an accounting scandal at a Fuji Xerox subsidiary, Fuji Xerox Australia and New Zealand; it also stated that there may be other as yet undisclosed fraudulent accounting  at other Fuji Xerox subsidiaries. Komori called these allegations “outrageous mischaracterizations” and also wrote: “Fuji Xerox’s past accounting issues have been properly resolved and there is no reason to assert that these issues continue to exist. Audits have been completed by two top-tier auditing firms, for all of Fuji Xerox’s operating companies in its territory, including China.”

Komori also wrote: “It was Xerox that first approached Fujifilm with the proposed transaction. Fujifilm entered into discussions because it believed the transaction could be beneficial specifically for Xerox shareholders.”

He continued: “Xerox’s common stock closed at $34.13 per share after the announcement of the transaction on January 31, 2018; yesterday, it closed at $25.33 per share, a decline of more than 25 percent. The market appears to understand that the agreed-upon transaction was substantially superior to the status quo for Xerox shareholders.

“Fujifilm continues to maintain that Xerox should take all steps to allow its shareholders to decide for themselves whether to approve the transaction with Fuji Xerox.”

Komori also wrote: “If Xerox does not renew the (Fuji Xerox) Technology Agreement in 2021, Fujifilm is prepared to respond by competing with Xerox in Asia Pacific, and by marketing in territories where Xerox is currently doing business unchallenged by Fujifilm, such as America and Europe.”

Komori also pointed that “Xerox presently has no marketing facilities here in Asia Pacific,” and that Fuji Xerox has a “global infrastructure that we can utilize for marketing worldwide. Accordingly, we believe it would be enormously costly and difficult for Xerox to gain business in Asia Pacific.”

Komori also critisized Visentin – who earlier had been appointed as a Fuji Xerox board direct as is customary – for not attending Fuji Xerox’s annual shareholders’ meeting and board meeting on June 20th. He also said that the MVisentin’s Monday letter “was sent without any prior communication from you and was actually publicized before it even reached me. This is impolite and wrong, and I hope our communications will be in a more respectful manner going forward.”

Last week, Fujifilm filed a lawsuit in U.S. District Court of Manhattan, seeking $1 billion in damages over the scrapped deal. It also sought to lift an injunction that bars the now scrapped deal, but that appeal was denied.

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