Xerox terminates merger agreement with Fujifilm

Xerox company is seen on a building in Minsk Belarus

Xerox company is seen on a building in Minsk Belarus

Xerox has called off its $6.1 billion (€5 billion ) sale to Japan's Fujifilm, after reaching a truce with Carl Icahn and Darwin Deason that ends months of infighting and will hand control of the United States company to the activist investors.

Icahn and Deason had in late April won a temporary injunction against the merger after a NY judge agreed the deal prioritized the interests of the Xerox CEO over that of the company's shareholders. The two adamantly opposed the merger with Fujifilm because they believed that it undervalued the company.

In an agreement with the two investors, which together own about 13% of Xerox (xrx), the US office equipment supplier said CEO Jeff Jacobson will step down along with several other board members.

The new board will be chaired by Keith Cozza, who is the current CEO of Icahn Enterprises, while its new CEO is set to be John Visentin.

Xerox XRX announced that it notified Fujifilm that the previously announced transaction agreement to combine Xerox with Fuji Xerox is being terminated in accordance with its terms due to the failure by Fujifilm to deliver the audited financials of Fuji Xerox by April 15, 2018 and the material deviations reflected in the audited financials of Fuji Xerox.

"Over the past several weeks, the Xerox board has repeatedly requested that Fujifilm immediately enter into negotiations on improved terms for a proposed transaction", Xerox's former board said in a statement. "Despite our perseverance, Fujifilm has not given assurances that intends to do so within a reasonable time", the message reads Xerox.

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Xerox said it believes that the transaction can not reasonably be expected to be completed under the circumstances, particularly given the court injunction and that shareholders didn't support it on current terms, as well as unresolved accounting issues at Fuji Xerox.

It does not affect any claims of Mr. Deason or other Xerox shareholders against Fujifilm for aiding and abetting. Five other directors also resigned from the board.

"The board also considered the potential instability and business disruption during a proxy contest".

Darwin Deason added, "With the limiting Fujifilm agreement terminated, Xerox is now positioned to conduct a true, robust strategic alternatives process".

Fujifilm was quick to take a combative stance, saying it disputes Xerox's right to terminate the deal and would look at all options including legal action seeking damages. Deason sued Xerox in February to block the proposal, accusing Jacobson of acting without authorization to strike a deal that preserved his job at shareholders' expense. He called it a new beginning.

Icahn and Deason have said they would consider an all-cash bid of at least $40 per share.

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