Xerox announces new settlement with activist investors; CEO Jacobson resigns

May 14, 2018
Originally published on May 14, 2018 8:24 am

The on-again, off-again agreement between Xerox and two major investors to settle a proxy fight is on-again.

On Sunday evening, Xerox announced that it has ended a proposed $6.1 billion dollar deal that would have seen Fujifilm take control of Xerox, and has reached a settlement with activist investors Carl Icahn and Darwin Deason.

As part of the agreement, Xerox says that CEO Jeff Jacobson has resigned along five members of the Board of Directors including Board Chairman Robert Keegan. Keith Cozza is expected to be named Chairman of the Board.

The new CEO will be John Visentin. He was hired back in March by Icahn and Deason as a consultant in their campaign to try and block the Fuji deal. Visentin is also expected to be named Vice Chairman of the board.

A similar settlement with Icahn and Deason was announced in early May, but was scuttled a couple of days later when Xerox said certain legal stipulations were not meant.

In the new agreement announced Sunday, Xerox’s now former board issued this statement:

“Over the past several weeks, the Xerox Board has repeatedly requested that Fujifilm immediately enter into negotiations on improved terms for a proposed transaction. Despite our insistence, Fujifilm provided no assurance that it will do so within an acceptable timeframe. The Xerox Board believes that the transaction cannot reasonably be expected to be completed under these circumstances, particularly given the court’s injunction of the transaction and the lack of shareholder support for the transaction on current terms, as well as the unresolved accounting issues at Fuji Xerox.  

The Board also considered the potential instability and business disruption during a proxy contest. Absent a viable, timely transaction with Fujifilm, the Xerox Board believes it is in the best interests of the company and all of its shareholders to terminate the proposed transaction and enter a new settlement agreement with Icahn and Deason. Under the agreement, the Xerox Board will be reconstituted to determine the best path forward to maximize value for Xerox shareholders.”

Carl Icahn provided the following statement:

“We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm. With that behind us and new shareholder-focused leadership in place, today marks a new beginning for Xerox. We have often said that the most important person at a company (by far) is the CEO. We are therefore also pleased that John Visentin, a tried and true veteran in this area, will be taking the helm.”

Darwin Deason provided the following statement:

“With the limiting Fujifilm agreement terminated, Xerox is now positioned to conduct a true, robust strategic alternatives process. John Visentin has spent weeks preparing himself to run the company and speaking to numerous market participants regarding strategic alternatives. Xerox is fortunate to have someone with his experience and preparation to lead it through this exciting and transformative time.”

As part of the agreement, Xerox and Icahn will withdraw their nominations for any other candidates for the 2018 shareholders meeting (which will be postponed). Xerox says its new Board of Directors will now begin a process to “evaluate all strategic alternatives to maximize shareholder value.”

The company says that while the settlement resolves a pending proxy battle it does not affect any claims of Deason or other shareholders against Fujifilm for "aiding and abetting." The settlement does resolve Deason's litigation against Xerox and its directors in terms of the proxy fight.

In Tokyo, Fujifilm said Monday that Xerox has no right to withdraw from the agreement and urged the company to hold a shareholders' meeting. It was considering legal action seeking damages, it said.  
 
``Fujifilm disputes Xerox's unilateral decision to terminate the transaction,'' it said in a statement.  
``The proposed transaction, including its economic terms, was negotiated at arms' length based on fair valuations and we continue to believe it is the best option designed to allow the stockholders of both companies to share the enhanced future value of the combined company with Fujifilm. Fujifilm will urge the Xerox board of directors to reconsider their decision.''  
 
But even with the tough talk from Fuji, Brighton Securities Chairman George Conboy says the Japanese company may not be out of the picture yet.
 

“Another transaction with Fuji, which despite all the talk, could still come back to the table, or a transaction with a private equity firm; they’ll sell it to whoever they can get enough value for, but it won’t go in pieces. There’s also the possibility that new management comes in and attempts to work with the company and grow the company and make more value by running it than by selling it.”Conboy believes if Xerox is sold to another company, it will be sold as entire entity. He doesn't think a prospective buyer would seek to split it up and just buy a portion of the business.

 

This story includes reporting by the Associated Press