Xerox CEO goes, deal blocked

The titanic struggle for control of the Xerox corporation has just seen its CEO Jeff Jacobson resign, amid accusations from a board director that he was a ‘rogue executive’, with the major shareholders forcing the entire board to be replaced, and the US$6.1bn deal with Fujifilm on the ropes following a court order.

Jacobson’s resignation comes as two of the three big Xerox shareholders – billionaires Carl Icahn and Darwin Deason – have succeeded in getting a judge to put a block on the mega deal which will give Fujifilm a 50.1 per cent stake in the business.

Deason accused Jacobson of pushing through the deal with Fujifilm essentially to save his own job. Among the evidence tendered Deason’s lawyers showed the Judge some text from what it said was a letter written by Xerox director Cheryl Krongard to Robert Keegan, the Xerox chairman, just before Christmas last year. The letter was titled ‘4 sleepless nights’ and in it Krongard described Jacobson a ‘rogue executive’ who disobeyed the board to secretly negotiate a deal with Fujifilm, and went on to describe how the board was disappointed with his performance and was looking for an outsider to replace him. The Judge in the case described Jacobson as ‘hopelessly conflicted’.

In court Xerox described the accusation as ‘highly disingenuous’ but the Judge came down in Deason’s favour. Fujifilm may appeal the ruling, saying that the views of all the Xerox shareholders should be heard.

Icahn and Deason who between them own 15 per cent of the A$10bn Xerox company have also succeeded in ousting the entire current Xerox board of directors, as they seek a higher valuation on their stockholding, and will nominate their own people at the Xerox AGM.

The new board will look at all alternatives to the existing deal with Fujifilm, including killing it completely, and asking Fujifilm for more money. Howeverv Fujiifilm is believed to consider the price is already at the top of the valuation.

Fujifilm stock price fell by 4.5 per cent on the news, Xerox rose by 2.7 per cent.

Under the terms of the proposed deal, announced in January, Xerox will first merge with the joint venture Fuji Xerox business that the company has operated with Fujifilm in Asia and Australia for half a century.

Current Xerox shareholders will receive a cash dividend of US$9.80 per share. Fujifilm will ultimately end up owning 50.1 percent of the combined entity, which expands the joint venture to encompass all of the Xerox operations.

For Fuji Xerox customers in Australia the battle for control is in some ways academic, as Fujifilm already owns Xerox in this part of the world. Some analysts though believe that Xerox will be better placed to operate in an intensely competitive market with the weight of Fujifilm and its massive R+D operation behind it.



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