Posts Tagged ‘Xerox’

  • Xerox may sell leasing finance unit

    Xerox Corp is considering the sale of its leasing unit that lends money to customers to rent printers and equipment, according to a report by Reuters. The move would make the company more attractive to potential buyers following the termination of its $6.1 billion sale to Fujifilm Holdings.

    Divesting the leasing unit would remove about $3.6 billion in debt.

    Billionaire activist investors Carl Icahn and Darwin Deason, who took control of Xerox earlier this year and scuppered the Fujifilm proposal, are preparing to launch an auction for the iconic US company, which has a market capitalization of $6.4 billion and total debt of $5.5 billion.

    Xerox, which declined to comment on the report, has not yet made a final decision on selling the leasing finance unit, sources told Reuters.

    Private equity firm Apollo Global Management reportedly approached Xerox in May to express its interest in acquiring the company.

    Last month, Xerox announced plans to sell Xerox products directly into the growing Asia Pacific market.

    In a letter to Fujifilm chairman Shigetaka Komori, Xerox CEO John Visentin said a $1 billion lawsuit filed in New York by Fujifilm against Xerox was “nothing more than a desperate, misguided negotiating ploy” to save the takeover proposal.

    Visentin says Fujifilm’s expectation that Xerox will come to Fujifilm with a new proposal for a combination transaction “is simply delusional. It will not happen.”

     

     

     

     

  • Xerox ‘moving forward’ into Australia/NZ

    Xerox Corp has slammed a $1 billion lawsuit filed by Fujifilm over their failed merger bid as “desperate” and announced plans to sell Xerox products directly into the growing Asia Pacific market.

    In a letter to Fujifilm chairman Shigetaka Komori, new Xerox CEO John Visentin said litigation filed in New York last week by Fujifilm against Xerox was “nothing more than a desperate, misguided negotiating ploy” to save the takeover proposal.

    “Enormous opportunity”: John Visentin, CEO Xerox Corp.

    Visentin pointed to a $450 million accounting scandal at Fuji Xerox subsidiaries in New Zealand and Australia as evidence of the Japanese company’s mismanagement.

    “No matter what you tell the Japanese media, it is abundantly clear that the bad actor here is Fujifilm, not Xerox. Fujifilm, as 75% owner and controlling partner of Fuji Xerox, has concealed from Xerox the true extent of a massive and ongoing accounting fraud at Fuji Xerox caused by Fujifilm’s own gross mismanagement.” 

    Visentin says Fujifilm’s expectation that Xerox will come to Fujifilm with a new proposal for a combination transaction “is simply delusional. It will not happen.”

    The Xerox CEO says the iconic US company is now focused on moving forward alone on several fronts in the Asia-Pacific region to protect its supply chain.

    “First, we will start, in a material way, to source products from new vendors. Second, we will build partnerships with companies that are aligned with the Xerox mission to provide world-class technology and solutions. Third, we currently believe Xerox will be much better served by not renewing our Technology Agreement with Fuji Xerox when it expires. We will detail for our shareholders the enormous opportunity for Xerox to sell products directly into the growing Asia-Pacific market with sole and exclusive use of the valuable Xerox name, and a more efficient, better managed supply chain than exists with Fuji Xerox today.”

    Xerox says it is moving to begin sourcing product from suppliers other than Fuji Xerox and dismissed suggestions by Fujifilm executives that Xerox was unlikely to survive on its own in a shrinking global office equipment market.

    “Nothing could be further from the truth,” Visentin said. “In fact, it is actually Fuji Xerox, which is responsible for nearly half of Fujifilm’s total revenue, that could potentially suffer ruinous consequences from the loss of over $1 billion of revenue from Xerox, its single largest customer. And legally, there is nothing Fujifilm can do to stop that from happening. The New York State Supreme Court has already enjoined Fujifilm from taking any action toward consummating the ill-advised takeover, and it follows that no court would allow Fuji Xerox to take adverse, punitive actions toward Xerox’s supply chain as we begin sourcing away from Fuji Xerox, which we are clearly permitted to do.”

    In response, Fujifilm issued a statement dismissing Xerox’s plan. “It is again no surprise to hear Xerox’s pretense to sell its products directly into the growing Asia-Pacific market. However, realistically speaking, we believe that it would be extremely difficult for Xerox – which does not currently possess any marketing channel in Asia – to build its own channel from scratch.”

  • Fujifilm sues Xerox for $1bn+

    Fuji Xerox headquarters in Japan.

    Fujifilm Holdings has sued Xerox Corp for more than $1 billion over the termination of a proposed merger deal between the two companies.

    In a lawsuit filed with the U.S. District Court in Manhattan, Fujifilm accused Xerox of “intentional and egregious conduct” in walking away from the $6.1 billion merger, according to a report by Reuters.

    In January, Xerox and Fujifilm agreed to a deal that would merge Xerox into their 56-year-old joint venture Fuji Xerox, which Fujifilm would control with a 50.1 percent stake.

    But after legal action by Xerox activist investors Carl Icahn and Darwin Deason, who said the deal undervalued the company, a new board at Xerox terminated the deal. Icahn and Deason, who together own about 15 percent of Xerox, said they would consider a cash bid of $40 per share.

    “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. “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.”

    The lawsuit seeks punitive damages and a $183 million merger termination fee. Fujifilm has also appealed a temporary injunction granted by a New York state judge to block the merger.

    In a statement earlier this week, Xerox said it was “extremely confident” that it had a contractual right to back out of the deal.

  • Fujifilm sets deadline for Xerox

    “If we have nothing by then, it can’t be helped,”: Fujifilm CEO Shigetaka Komori.

    Fujifilm Holdings says it will walk away from its $US6.1 billion merger proposal with Xerox Corp if there’s no progress within six months.

    In his first media briefing since the new board at Xerox terminated the merger agreement, Fujifilm chairman and CEO Shigetaka Komori said: “I don’t have a specific deadline in mind, but it should normally be from several months to six months. If we have nothing by then, it can’t be helped.

    “When I thought of the best way to maximize the corporate value of Xerox, the takeover was the only choice and I still think this plan is the one and only way,” Komori said. “But I’m not going to wait forever.”

    A U.S. court has issued an injunction blocking the merger to allow for the proposal to be presented to shareholders at Xerox’s upcoming AGM.

    Fujifilm has filed an appeal seeking to lift the injunction. “We signed the agreement with Xerox through a proper legal process,” said Komori. “We will keep pushing Xerox to fulfill what’s included in the agreement.”

    In February, Xerox and Fujifilm agreed to a deal that would merge Xerox into their 56-year-old Asia joint venture Fuji Xerox, which Fujifilm would control with a 50.1 percent stake.

    But after legal action from Xerox activist investors Carl Icahn and Darwin Deason, who said the deal undervalued the company, a new board at Xerox scrapped the deal. Icahn and Deason, who together own about 15 percent of Xerox, said they would consider a cash bid of $40 per share.

     The new board, headed by new CEO John Visentin – an ally of Icahn – is preparing a prospectus for an auction process that could take 90-120 days, according to Deason. Private investment firms including Apollo have already expressed interest in the iconic US company.

    Fujifilm currently owns 75% of Fuji Xerox, a joint venture launched more than 50 years ago.

     

  • Xerox under the hammer – Andy McCourt’s ReVerb

    Billionaire Xerox shareholder Carl Icahn reportedly described the industry as ‘a piece of sh*t.’

    The storm-tossed recent history of Xerox seems to have entered calmer waters for now, as the shareholder activists Carl Icahn and Darwin Deason have succeeded in getting what they wanted – a free market auction of the USD$7.16 billion market cap. company. This is below half of what Xerox was worth in September 2015, just prior to splitting off its Business Services division, now a separate company called Conduent.

    Andy McCourt, Print21.

    The concept of auctioning-off to the highest bidder such a large company as Xerox is somewhat foreign to usual business protocols. Companies, unless they are bankrupt and being liquidated, are normally acquired in a take-over bid that can be either friendly or unfriendly. It’s not unusual to see another higher offer or a gazumping of the initial offer by a third party but an out-and-out auction is normally reserved for distressed assets and companies that are in financial difficulties.

    But an out-and-out auction of a large company that is, apparently, not under financial stress is strange. It’s no secret that neither Icahn nor Deason want to run Xerox and that the board they have installed is only there to facilitate the auction and extract maximum value for the big shareholders, irrespective of the on-going success of the NYSE (XRX)-listed company.

    Can shareholders dictate how a company is run?

    The juicy part of Xerox has already been split off with the creation of Conduent (NYSE: CNDT), whose shares are up 19% year-to-date. Xerox’s are down 6%. So, this is looking more and more like a break-up; a raking over the remaining bones of a once iconic company, suffering the ignominy of being auctioned off to the highest bidder, rather than being run with vision, invested in (which Fujifilm promised) and able to come up with the same brilliant ideas that gave us the copier, ethernet, laser printer, GUI and mouse. Yes, they all came out of Xerox PARC research division, an incorporated Xerox company since 2002.

    That two activist shareholders in Icahn and Deason, with only around 15% of issued stock, can effectively take over and dictate what happens to a major publicly-listed company and decide to auction it off is unprecedented in company law. Respected US Management Study Guide says (caps theirs):

    “However, shareholder ownership does not imply control since the company law makes it clear that only a majority percentage of the shareholders can exercise control. The point here is that, to have effective say over the running of the company, a majority vote of the shareholders is necessary following the democratic norms of participation that govern companies.”

      Harvard Business Review goes further, having published:

    “Corporate reality, though, has proved stubbornly uncooperative. In legal terms, shareholders don’t own the corporation (they own securities that give them a less-than-well-defined claim on its earnings). In law and practice, they don’t have final say over most big corporate decisions (boards of directors do). And although many top managers pledge fealty to shareholders, their actions and their pay packages often bespeak other loyalties. This gap between rhetoric and reality—coupled with waves of corporate scandal and implosion—has led to repeated calls to give outside investors even more say.”

     The bloc – backgrounder

    ‘No stranger to accounting scandals himself’: billionaire investor Darwin Deason.

    Deason and Icahn present themselves as hard-done-by investors and maybe they are; but neither are angels of light. Deason repeatedly highlights the ‘accounting scandal’ in Fuji Xerox New Zealand and to a lesser extent Australia under the aegis of Neil Whittaker. He is no stranger to accounting scandals himself, having experienced accusations of back-dating share options in the company he ultimately sold to Xerox: Affiliated Computer Services. Over 60 ACS managers lost their jobs including the CEO Mark King. Known as ‘springloading,’ the back-dating of share options can make large sums of money for those in the game by choosing past low-price dates to acquire stock that then rises in value.

    Chairman Deason came out of it relatively unscathed through ‘not knowing’ but settled with the US Securities & Exchange Commission with neither side ‘confirming or denying’ culpability. Deason has often been associated with cyber-intelligence activities and even CIA involvement. Indeed, at the Southern Methodist University in Dallas, there is the “Darwin Deason Centre for Cyber-Security”  https://www.smu.edu/Lyle/Institutes/DeasonInstitute, so it’s safe to assume he is a very smart guy with powerful friends.

    There’re even some conspiracy-like stories about Deason and his CIA links: http://www.constantinereport.com/comair-crash-fenton-dawson-acs-cia-torture-scandal-corporate-looting-the-nsa-etc/

    Carl Icahn, on the other hand, is just an old-fashioned Wall Street wolf, making his approximately $20 billion fortune by stock plays, corporate raiding, shorting and anything else. The character Gordon Gekko (“Greed is good”) from the film Wall Street is said to be partially modelled on him: https://www.economist.com/node/9176383

    He made his first fortune in the 1980s with a hostile takeover of troubled airline TWA, borrowing money to take it private then stripping its assets to pocket around USD$469 million. Lately, he has been an economic advisor to US President Donald Trump.

    What about Fujifilm?

    So, the kind of businessmen now calling the shots at Xerox cannot be expected to enthusiastically come up with new technologies nor have an interest in our industry. Indeed, according a memo by ousted CEO Jeff Jacobson, Icahn and now-Xerox-board-member Jonathan Christodoro, described ‘the industry’ as follows: “The discussion centred around Icahn and Christodoro’s view that the industry ‘was a piece of sh*t’ and the Xerox business was not driving value,” Jacobson wrote.

    It’s all here in one of the best updates on the situation by Bloomberg’s Drake Bennett: https://www.bloomberg.com/news/features/2018-05-24/how-not-to-negotiate-a-6-1-billion-deal

    There’s no denying the Fujifilm proposed takeover was very smart and beneficial to Fujifilm Holdings, I wrote about it in February: https://print21.com.au/stunningly-brilliant-deal-andy-mccourt-on-fujifilms-xerox-takeover/152084

    However, I would say that Fujifilm and the Fuji Xerox joint venture part of the Xerox structure is the dialysis machine that has kept Xerox’s kidneys functioning for the past two decades. Remove it and the patient will get very sick indeed – or die.

    Fujifilm makes most of the sellable tech that Xerox offers. It is in control of the largest market on Earth – Asia Pacific, having boosted its 50% jv share to 75% in 2001 when Xerox was on the verge of bankruptcy. It was Fujifilm’s money that saved the company. Forbes magazine sums it up here: https://www.forbes.com/2002/11/06/1106soapbox.html#1116b2c5486f

    If Deason and Icahn think that Xerox can prosper without Asia Pacific (especially China) and without Fujifilm, they must have rocks in their heads. Of course, they don’t – they know the score precisely and just want out of their holding positions for as much as possible. Maybe Fujifilm should have upped their offer but instead have opted for a legal challenge to the Icahn-Deason putsch. Maybe the poker game they are playing is to force Fujifilm’s hand because they know that no one in their right mind would buy Xerox without its major supplier and business partner locked in.

    Likely bidders

    Who would bid at an auction for Xerox?

    • Apollo Global Management – private equity buy-out firm closely linked to the Icahn-Deason bloc. Expect a colossal break-up if this happens.
    • HP – Did express interest early on in a call to Jeff Jacobson but was rebuffed. Slotting HP tech into Xerox to replace Fujifilm would have its appeal but what about the jv in Asia Pacific?
    • Konica Minolta – would love to own Xerox and its channels I am sure and, as the arch-combatant with Fujifilm from photographic days, would delight in removing them. But again -what about the 75/25 jv in Asia Pacific?
    • Canon – Bought Océ in 2010 and maybe this has not gone as well as hoped for. They could be nervous bidders.
    • Other private equity – such as Danaher Corporation who are an exception to the ‘breakup and loot’ model. They run companies successfully, including Esko, X-Rite, AVT, Leica Microsystems, Pantone and Videojet in our industry.

    Unless Fujifilm’s court action succeeds, Xerox is headed for auction. Let’s all hope that the ‘Going-going’ does not literally end in ‘Gone.’

    Update: In its latest filing this week with the New York State Supreme Court, Fujifilm has slammed the ‘self-serving’ settlement that saw the entire board ousted and replaced by Icahn-Deason friendly members. It also claims the termination of the deal is ‘in violation of a valid contract authorised unanimously by the [Xerox] board.’ 
    Word on the street is that Fujifilm Holdings will seek damages of up to $245 million if the deal is eventually stymied. This will get uglier.