Fri, 21 Sep 2018

Fujifilm slaps Xerox with lawsuit over failed merger

By Sheetal Sukhija, The Orlando News
20 Jun 2018, 01:33 GMT+10

NEW YORK, U.S. - Slamming Xerox for backing out a merger between the two companies, Fujifilm has slapped a lawsuit against the company.

Fujifilm wants more than $1 billion from Xerox over the failed merger and said in its lawsuit that it was seeking "punitive damages for Xerox's intentional and egregious conduct" in canceling the deal.

The Japanese firm filed a lawsuit in a district court in New York on Monday.

The Norwalk, Connecticut-based Xerox was set to merge with a 56-year-old existing Asia joint venture between the two companies called Fuji Xerox, which would have given Fujifilm control of the combined entity.

About 75 percent of Fuji Xerox is owned by Fujifilm, and the joint venture handles contracts that supply global clients with Xerox services in the United States and Europe, and Fuji Xerox services in Asia. 

Fujifilm was hoping that the merger would deliver at least $1.7 billion of cost savings and $1 billion of new revenue annually.

However, the deal faced strong opposition from activist investors Carl Icahn and Darwin Deason, who own 15 percent of Xerox between them.

The activist investors argued that the deal undervalued the iconic American printer and copier firm.

Last month, Xerox announced that it had reached a new agreement with the two investors, which it said saw CEO Jeff Jacobson and five other board members stepping down from the company.

In a statement released at the time, Xerox said that it was "extremely confident" about its right to back out of the deal. 

The company also added that it would seek remedies for Fujifilm's "mismanagement and misconduct."

On Monday, following Fujifilm’s lawsuit, reports noted that the amount the Japanese firm is seeking from Xerox is significantly higher than the $183 million "termination fee" the companies agreed upon if one of them walked away from the agreement. 

However, Fujifilm has argued in its lawsuit that Xerox has deprived it of the benefits of the deal they struck and is also demanding that Xerox be ordered to pay the termination fee.

The company said in a statement on Monday that it continued to believe that its takeover of Xerox was the "only correct solution" for investors in both companies.

Fujifilm said, "It is inconsistent with shareholder democracy to allow Carl Icahn and Darwin Deason, minority shareholders with only 15 percent of Xerox's shares, to dictate the fate of Xerox.”

Both the companies had announced the $6.1 billion merger in January this year. 

While abandoning the deal, Xerox said in a statement ”Despite our insistence, Fujifilm provided no assurance that it will do so (start talks about improved terms of the proposed transaction) within an acceptable timeframe.”

At the time, Fujifilm said it disputes Xerox's right to terminate the deal and would look at all options including legal action seeking damages.

Xerox is now expected to go up for sale in an auction at a higher price.

On Monday, responding to Fujifilm’s lawsuit, Xerox said that it remained “extremely confident” it had a contractual right to back out, and would seek remedies for Fujifilm’s “mismanagement and misconduct.”

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