Court Overturns Injunctions That Blocked Proposed Fujifilm-Xerox Deal

In yet another twist in the Fujifilm-Xerox battle, a U.S. court has overturned preliminary injunctions requested by activist investors Carl Ichan and Darwin Deason that had blocked a planned merger deal with Japan’s Fujfilm and Xerox.

Last May, Xerox terminated a proposed $6.1 billion deal with Fujifilm in a settlement with activist investors Carl Icahn and Darwin Deason. That deal also gave control of Xerox to new management, including new Xerox board members, and a new Xerox CEO John Visentin.

According to Reuters, the ruling by the New York State Appellate Court yesterday could give Fujifilm leverage to bring Xerox management back to the negotiating table.

The court found in its ruling that Xerox’s former CEO Jeff Jacobson had neither misled or misinformed the board.

Yesterday’s court ruling stated: “Plaintiffs failed to show bad faith or a disabling interest on the part of the majority of the directors of Xerox such that plaintiffs actions stood a likelihood of success on the merits. The board, which engaged outside advisors and discussed the proposed transaction on numerous occasions prior to voting on agreeing to present it to the shareholders, did not engage in a mere post hoc review, nor was the transaction unreasonable on its face. In the light of the foregoing, the business judgement rule does apply.”

Fujifilm said in a statement that it stands by its view that the original planned merger remains the best option for shareholders of both companies:

“We are very pleased with the New York State Appellate Court’s decision, which ends the lawsuit against Fujifilm in its entirety and validates our position that Fujifilm acted properly and negotiated with Xerox at arms’ length for the transaction that was unanimously approved by the Boards of both companies,” Fujifilm stated. “The Court’s decision will allow us to discuss with Xerox the fulfillment of the original agreement.”

“All Xerox shareholders ought to be able to decide for themselves the operational, financial, and strategic merits of the transaction to combine Fuji Xerox and Xerox,” Fujifilm’s statement said.

Back in January 2018, Xerox and Fujfilm agreed to a complex deal that would have merged Xerox in a the decades-old Xerox-Fujilm joint venture, Fuji Xerox, and given Fujifilm control of the new company, with former Xerox CEO Jacobson serving as new CEO of the new company.

In the previous April 2018 ruling that was overturned yesterday, New York State Court Judge Barry Ostrager had said that former Xerox CEO Jacobson was “hopelessly conflicted” because Jacobson would have been CEO of the new company.

However, yesterday, the appellate judges did not find anything wrong with Jacobson’s conduct, stating: “To the extend former CEO of Xerox, Jacobson, was conflicted, inasmuch as the transaction provided that he would serve as the future CEO of the new company, the conflict was acknowledged; he neither misled nor misinformed the board.”

The proposed deal announced in January 2018 was followed months of protest by Icahn and Deason, who together own 15 percent of Xerox, and who launched a bitter, often personal fight against Xerox management, arguing that the deal grossly undervalued Xerox. However, Icahn has said that he would approve of a sale if Fujifilm raised its offer to $40 per share.

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