FUJIY FUJIFILM Holdings Corporation (PK)

By David Benoit 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 2, 2018).

Xerox Corp. said its chief executive, Jeff Jacobson, is resigning in a settlement with two of the company's biggest investors, Carl Icahn and Darwin Deason, a pact that shakes up the majority of the board and puts its transaction with Fujifilm Holdings Corp. at risk.

The new board, whose majority is backed by the activists, is expected to consider alternatives to the deal with Fujifilm, a complex transaction that sells the majority of Xerox to the Japanese company by combining with a joint venture the two operate in Asia.

Messrs. Icahn and Deason have been seeking to kill that deal, saying it undervalues Xerox and had alleged Mr. Jacobson quickly negotiated the transaction in an attempt to save his own job after his board had instructed him to stop the talks. Xerox has acknowledged it launched a CEO search last year.

Xerox chose to settle with the activists after a judge last week temporarily blocked the Fujifilm transaction, siding with Mr. Deason in a lawsuit and saying the talks were conflicted by Mr. Jacobson's tenuous position. Seeking a settlement would avoid a distracting fight over its board and uncertainty about the future of the deal, Xerox's existing board said Tuesday.

The settlement effectively ends a legal fight with Xerox and its investors as well as a potential proxy fight that would have sought to remove the entire board, by giving Messrs. Icahn and Deason six of what will now be nine seats. Together, the two billionaires control about 15% of Xerox as the first- and third-largest investors. Keith Cozza, who is chief executive of Mr. Icahn's public company, will be named chairman of Xerox.

Xerox will name as chief executive John Visentin. Xerox had considered Mr. Visentin as the leading candidate to succeed Mr. Jacobson last year before it ended its search and reaffirmed faith in him, The Wall Street Journal has reported. Mr. Visentin is a former executive at several technology companies and had been working with the activist investors at Xerox.

The settlement doesn't include pending litigation Mr. Deason has against Fujifilm. The judge also criticized Fujifilm's actions in his opinion halting the deal. That pending litigation could give the new Xerox board some leverage in discussions with Fujifilm.

The Japanese company said Wednesday it is appealing the injunction against the deal with Xerox. Fujifilm said Xerox is obligated to comply with the agreement reached in January.

"We believe the record shows our good faith and arms-length negotiations for the benefit of all shareholders," Fujifilm said. "We strongly believe that all Xerox shareholders should be able to decide for themselves the operational, financial, and strategic merits of the transaction."

Xerox had previously defended Mr. Jacobson and said that he had won over the board by hitting earnings and financial targets, and that the whole board believed the Fujifilm deal was the best option. But the judge's opinion last week left the board in a bind: Xerox would have to fight two big investors over its board without being able move forward with its deal or negotiate an improved offer from Fujifilm.

The judge has to sign off on the settlement.

Seven of the old board members will resign, including Chairman Robert Keegan, who approved Mr. Jacobson's negotiations, and lead director Ann Reese, who also approved of his talks with Fujifilm.

Xerox and Fujifilm have been in discussions about renegotiating the deal, but Fujifilm will now face a new board led by a team that wants to not only end the sale but also potentially cancel the 50-plus-year joint venture, Fuji Xerox, that is at the heart of their relationship.

Xerox had asked Fujifilm to sweeten the deal, but in its statement Tuesday night, Xerox said Fuji had yet to make an improved offer.

Fujifilm owns 75% and Xerox 25% of their joint venture in Asia. Under their prospective deal, that joint venture would be folded into U.S.-based Xerox, and Fujifilm would own 50.1% of Xerox. Current Xerox shareholders would also be paid a $2.5 billion special dividend.

Write to David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

May 02, 2018 02:47 ET (06:47 GMT)

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