US court puts Fujifilm, Xerox merger on hold

Fujifilm’s merger with Xerox which was finalised a few months ago hit a US court roadblock when Judge Barry Ostrager of the Supreme Court of the State of New York, County of New York hearing activist investors lawsuit filed by Darwin Deason, granted injunctions in the matter, saying Xerox chief executive officer Jeff Jacobson sought to conclude the deal even though he was advised to end negotiations.

02 May 2018 | By Noel D'Cunha

The court ruling will temporarily affect the proposed USD 6.1bn (approximately Rs 40,751-cr) takeover deal of Xerox by Fujifilm, which has been opposed by Deason and Carl Icahn, two of Xerox’s top shareholders who own a combined 15% of the US printer and copier maker, had called the deal structure “tortured” and “convoluted”.

According to court’s decision reported by Reuters, “The facts abduced at the evidentiary hearing clearly show that Jacobson, having been told on November 10 that the Board was actively seeking a new CEO to replace him, was hopelessly conflicted during his negotiation of a strategic acquisition transaction that would result in a combined entity of which he would be CEO.”

Fujifilm in a statement said it would consider all options, including whether to appeal against the decision. “We disagree with and are disappointed by the judge’s ruling.” The Japanese firm in its statement added, “We strongly believe that all Xerox shareholders should be able to decide for themselves the operational, financial, and strategic merits of the transaction.”

As expected, Xerox too disagreed with the ruling and said it will immediately appeal the court’s decision. “The company strongly believes that its shareholders should be allowed to exercise their right to vote on the transaction and decide for themselves,” the company said.

It added that it believes a combination with Fuji Xerox is the best path forward to create value for shareholders. “The Xerox board undertook a rigorous process to reach its decision to approve the proposed transaction, including a comprehensive review of the company’s strategic and financial alternatives, as well as potential transaction structures in its negotiations with Fujifilm over a 10-month period.”

Deason, who in February 2018 had asked the court to block the merger saying the agreement dramatically undervalues Xerox, said that he is “grateful the court acted to protect the shareholders of Xerox”.