- Fujifilm accused Xerox of breach of contract
- Xerox was also accused of engaging in “intentional and egregious conduct”
- The merger was scrapped on May 13
Fujifilm Holdings Corp sued Xerox Corp on Monday for well over $1 billion (roughly Rs. 6,800 crores), faulting the printer and copier company for succumbing to pressure from activist investors Carl Icahn and Darwin Deason in calling off a proposed merger.
In a complaint filed with the US District Court in Manhattan, Fujifilm accused Xerox of breach of contract and engaging in “intentional and egregious conduct” in abandoning the $6.1 billion (roughly Rs. 41,700 crores) merger announced in January.
Icahn, the billionaire, and Deason together owned 15 percent of Xerox shares, and said the merger undervalued the Norwalk, Connecticut-based company.
“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,” Fujifilm said in a statement.
The merger was scrapped on May 13 when Xerox, in a settlement with Icahn and Deason, agreed to install several new directors and replace Jeff Jacobson as chief executive with technology executive John Visentin.
Xerox also cited unresolved accounting issues as a reason to end the merger.
In a statement on Monday, Xerox said it remained “extremely confident” it had a contractual right to back out, and would seek remedies for Fujifilm’s “mismanagement and misconduct.”
A spokeswoman for Deason had no immediate comment. Icahn did not immediately respond to a request for comment.
Xerox has been exploring strategic options, including transactions with other companies, but the lawsuit could force it to address Fujifilm’s grievances sooner.
A merger would have combined Xerox with the 56-year-old joint venture Fujifilm Xerox, in which Fujifilm and Xerox had stakes of 75 percent and 25 percent, respectively.
Thereafter, Fujifilm would have owned 50.1 percent of Xerox’s common stock, and Xerox shareholders would have received a $2.5 billion special dividend.
Fujifilm had hoped the merger would deliver at least $1.7 billion of cost savings and $1 billion of new revenue annually.
Its lawsuit also seeks punitive damages and a $183 million (roughly Rs. 1,250 crores) merger termination fee.
“Xerox has recently been subject to the whims of activist investors Carl Icahn and Darwin Deason, who, notwithstanding their minority ownership of Xerox shares, have yanked the Xerox Board in more directions than can be counted,” Fujifilm said.
Fujifilm has appealed an April 27 temporary injunction sought by Deason and granted by a New York state judge to block the merger.
Deason, who had accused Jacobson of arranging the merger to keep his job, is still pursuing a lawsuit accusing Fujifilm of aiding and abetting breaches of fiduciary duty by Xerox’s old board. Fujifilm filed counterclaims on June 14.
Xerox shares closed down 17 cents, or 0.6 percent, at $27.24 on the New York Stock Exchange.
The case is Fujifilm Holdings Corp v Xerox Corp, US District Court, Southern District of New York, No. 18-05458.[“Source-gadgets.ndtv”]