Icahn Declares Opposition to Xerox Merger -- WSJ

By David Benoit 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 13, 2018).

Carl Icahn wants to kill Xerox Corp.'s deal to cede control to Fujifilm Holdings Corp., opening up what could be a protracted fight over the future of the iconic American company.

The printer-and-copier pioneer said on Jan. 31 that it had struck a deal to combine itself with a joint venture it has run with Fujifilm for more than 50 years and give the Japanese company a 50.1% stake in the new entity.

Mr. Icahn, the famed activist investor, has teamed up with fellow billionaire Darwin Deason, and on Monday, in their first public comment on the deal, they said they plan to vote against it. Together, they control 15.2% of the stock, a significant obstacle for a merger that requires Xerox shareholder approval.

The pair criticized company management and the proposed payment to Xerox holders -- which includes a $2.5 billion dividend payments equal to one-third of Xerox's market value before The Wall Street Journal first reported on deal talks last month.

Before the deal was announced, the two had demanded that Xerox find a replacement for Chief Executive Jeff Jacobson, but he would stay on to run the new company.

"To put it simply, the current board of directors has overseen the systematic destruction of Xerox, and, unless we do something, this latest Fuji scheme will be the company's final death knell," Messrs. Icahn and Deason wrote in a letter to shareholders Monday. "We urge you -- our fellow shareholders -- do not let Fuji steal this company from us."

Xerox has billed the deal as its best option in a slumping print industry because it will pair with a Fuji team that has already successfully shifted into new technologies. The proposal calls for cutting $1.7 billion in costs to help boost the bottom line. And it would give Xerox more of a say in a joint venture that has hindered Xerox's innovation given the U.S. company's lack of control in Asia, the biggest growth market.

"The transaction provides shareholders with the opportunity to benefit from ownership in a combined company that has enhanced growth prospects and a stronger financial profile to support future value creation, as well as an immediate substantial dividend payment," Xerox said in a statement Monday. The company said the deal was the best course following a monthslong review of its options.

Messrs. Icahn and Deason wrote a six-page letter, including a parable about a pair of brothers with an unequal inheritance, that seeks to undermine the credibility of the Xerox board and its navigating of the joint-venture contract. The two investors said an accounting scandal at Fuji Xerox last year may have been an opening for Xerox to get out of that contract -- an avenue they would use to kill the deal.

The investors had been evaluating their next steps after the deal with Fujifilm was announced, the Journal had reported. Mr. Icahn sold some Xerox stock last year, raising questions about what the pair would do.

Xerox shares rose 0.7% to $29.82 Monday.

Write to David Benoit at [e-mail]

(END) Dow Jones Newswires

February 13, 2018 02:47 ET (07:47 GMT)

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