Fujifilm’s Komori Concedes Xerox Acquisition Not Likely

In an interview with the Nikkei Asian Review, Fujifilm Chairman and CEO Shigetaka Komori has admitted that the proposed acquisition of Xerox by Fujifilm announced in January and then canceled by Xerox in May has become “difficult.”

In an interview with Nikkei, Komori said he met with Xerox CEO John Visentin in November and that the two shared the view that the companies can maintain their existing alliance. Earlier this year, Visentin had said that Xerox  may consider sourcing copiers and printers from other companies, instead of sourcing them from Fuji Xerox, Xerox’s decades-old joint venture with Fujifilm.

Komori  also said that Fujifilm will be able to put its mainstay copier business “on the growth track” even if Xerox does not reconsider its position.

In January, Fujifilm and Xerox announced a deal under which Fujifilm would sell its stake in Fuji Xerox to Fuji Xerox itself and then use the proceeds to acquire a 50.1-percent stake in Xerox. But the plan met with strong opposition from Xerox shareholders, including Carl Icahn, the Xerox’s largest shareholder.

After several legal battles, Xerox backed out of the deal.

However, Komori told Nikkei, “We haven’t given up on acquiring Xerox, but we will not take the initiative at this point. We are not going to try to persuade Xerox,” but noted “We are open to any proposals from Xerox.”

Earlier this year, Fujifilm filed a $1 billion breach-of-contract lawsuit against Xerox after Xerox called off the deal.

Xerox shareholder Icahn has argued that Fujifilm’s proposed offer for Xerox was too low, stating Xerox is worth $40 per share. In the past year, Xerox stock has been trading at about $29 per share, but with this week’s news that Moody’s downgraded Xerox’s debt to a “junk” rating, it fell to about $20 per share.

Fujifilm Chairman Komori argued that the $40 per share asking price “… is too high. We won’t do it. We have our own shareholders that we have to think about.”

In this week’s interview, Komori said that Fujifilm likely won’t renogotiate the deal’s terms: “We have no intention of sweetening the financial terms of the January acquisition plan. A large majority of Fujifilm shareholders object to an additional contribution. We will not consider a new acquisition plan from our side.”

Xerox CEO Visentin is said to have traveled to Japan after a Fujifilm legal victory in October,  to open talks with Fujifilm.

On the bright side, Komori said Xerox-Fujiflm relations have improved: “Relations [between Fujifilm and Xerox] have been improving. As a result of the talks [with Visentin], I could gain the understanding [from him] that current relations are good.”

Komori also expressed confidence that Fujifilm will be able to achieve growth by maintaining its existing alliance with Xerox, even if it can’t acquire Xerox.

Fujifilm is also said to be restructuring Fuji Xerox, and expects its reforms to lead to a 55 billion yen ($491 million) profit for the financial year through March 2020.

“The outlook is bright even if we can’t acquire [Xerox],” Komori said.

Overall, the worst-case scenario – that the  battles between Xerox and Fujifilm would destroy the Fujifilm-Xerox alliance – now appears avoidable.

As for the acquisition, Komori said it faces a bumpy road. “There are probably some Xerox shareholders who will not accept it without sweeter terms,” he said. “It will be tough to convince them.”

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