End of an Era: Xerox ends Its Independence, cedes control to Fujifilm


Xerox Corp., a once-iconic American innovator that became synonymous with office copy machines, is ceding control to Japan’s Fujifilm Holdings Corp. in a deal that creates an $18 billion company.

Xerox, which has a market value of $8.3 billion, will first merge with a joint venture the company operates with Fujifilm in Asia, according to a statement Wednesday. Current Xerox shareholders will receive a cash dividend of $9.80 per share. Tokyo-based Fujifilm will ultimately end up owning 50.1 percent of the combined entity, which expands the joint venture to encompass all of Xerox’s operations.

The agreement marks the end of independence for a U.S. company whose roots trace back to the start of the 20th century. Xerox became famous for its hardware — its copiers were so ubiquitous that the name Xerox became a verb — and it also invented an early graphic interface and mouse now so familiar with modern computers. But it fell on hard times as Canon Inc. and Asian competitors eroded its dominance while email and other forms of electronic communications took over.

Activist investor Carl Icahn had pushed Xerox to explore “strategic options,” including shaking up its joint venture with Fujifilm, and electing four new directors. Icahn, along with investor Darwin Deason, also called for Xerox to replace Chief Executive Officer Jeff Jacobson. He will become CEO of the new combined company.
“They probably felt pressured to do something because Icahn and them are going to get their way,” but the deal isn’t going to be a game changer for the business, said Argus Research Corp. analyst Jim Kelleher. The office equipment and copier industry as a whole is shrinking, a decline that Xerox has been managing steadily, he said.

“I don’t think Icahn thought this was a transformative deal, but a way to jazz up the stock price a little,” Kelleher said. Xerox shares rose 4 percent to $33.99 at 9:31 a.m. in New York Wednesday.

Sales Drag

The joint venture will cut 10,000 jobs in Asia as part of the restructuring as the Japanese company struggles with an “increasingly severe” market environment, Fujifilm said.

Xerox and Fujifilm’s 55-year-old joint venture in Asia is the subject of a recent accounting probe into its practices in New Zealand and Australia, which prompted Icahn to call for renegotiating or scrapping the agreement.

The new company will accelerate revenue growth through its global reach and pursue developments in inkjet, imaging and artificial intelligence, it said.

“The proposed combination has compelling industrial logic and will unlock significant growth and productivity opportunities for the combined company, while delivering substantial value to Xerox shareholders,” Jacobson said in the statement.

Fujifilm executives said in a press conference Wednesday in Tokyo they were confident all shareholders will approve the deal. The new combined company, Fuji Xerox, will trade on the New York Stock Exchange and have dual headquarters in Norwalk, Connecticut, and Tokyo.

Fujifilm Holdings, which lowered its forecast for operating income for the year ending March 31, will cut one-fifth of its global workforce at the joint venture. The company said it will incur a one-time expense of 72 billion yen ($662 million) over three years.

The Japanese company, which generates almost 60 percent of sales from overseas, is pushing to offset waning demand at its printer and copier hardware business by shifting focus to managed-print services and medical imaging. Expansion into the health-care sector with products such as ultrasound and endoscope equipment should boost sales, but that segment’s thinner margins could offset gains in the imaging division, according to Bloomberg Intelligence.
Fujifilm’s stock plunged in the final minutes of trading in Tokyo on Wednesday before the deal was announced, dropping more than 8 percent to the lowest level since August.