Xerox-Fujifilm deal should be renegotiated: Carl Icahn

Majority stock owners of Xerox Corp, Carl Icahn and Darwin Deason, have called on the firm to renegotiate the terms of agreement with Fujifilm in Fuji Xerox, a joint venture between the two which they say appear to be lopsided towards Fujifilm.

In an open letter addressed ti shareholders of Xerox Corp, activist investor Carl Icahn called for the renegotiation if not termination of the firm’s joint venture with Fujifilm Holdings and reiterated his demand for a change of leadership at Xerox.

Icahn’s letter adds to Darwin Deason’s voice, another majority stock owner at Xerox who demanded that Xerox make public the terms of the deal it has with Fujifilm which he thinks is probably “one-sided”.

“We are obviously in favor of renegotiating the joint venture agreement to make it more favorable for Xerox,” said Icahn. “This should have been done a long, long time ago.”

Terming Deason’s criticism as “false and misleading”, Xerox stated it was aware of Icahn’s letter and that it was “focused on creating value for all shareholders and will continue to take action to achieve this objective.”

The 5 decade old venture, in which Fujifilm owns 75% and the remaining 25% is owned by Xerox, is a pillar of Fujifilm’s business and accounts for nearly 50% of the group’s overall operating profit. However the venture has limited future prospects given the declining demand for office printing.

The joint venture, Fuji Xerox, reported an operating profit of around $750 million on sales of $10 billion in the year ended March 2017.

It covers the Asia-Pacific region including Japan and China.

While declining to comment on Icahn’s letter, Fujifilm is aiming to expand the joint venture with a focus on document solutions services and aims at tapping fresh demand in emerging markets, including Asia.

Icahn, who had also previously called for a change of leadership at Xerox, said it was lucid that the firm’s current management was incapable of renegotiating the joint venture in Xerox’s favor.

Last week, the Wall Street Journal had reported that under pressure to find new growth areas for its copier and printer business, Xerox was in talks with Fujifilm, a Japanese camera maker, which includes a change in control of Xerox.

Analysts at Deutsche Bank in a report to clients earlier this week stated they do not see much advantage in Fujifilm taking a larger stake in Fuji Xerox given the current market climate. However if Xerox were to increase its stake in the Fuji Xerox joint venture it “could push for a more aggressive integration with Fuji Xerox that could have cost benefits”.

“We believe drastic action is needed NOW because we fear that failing to replace Jeff Jacobson as (Xerox) CEO could inevitably result in the loss of our entire investment,” wrote Icahn.

On Thursday, Xerox’s shares fell by 1.2% to $31.53. They have however risen by more than 3% since January 10, the day before WSJ submitted its report.

Fujifim’s shares have edged up by 0.6% on early Friday afternoon and have changed little during that same period.

($1 = 110.9700 yen)

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