Icahn, Deason Say Fuji's Xerox Takeover Undervalues Company

(Bloomberg) -- Carl Icahn and Darwin Deason have come out against Xerox Corp.’s plans to cede control to Fujifilm Holding Corp., arguing the deal “dramatically undervalues” the 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,” the two Xerox investors said in a letter to shareholders Monday.

Icahn is Xerox’s second-largest holder with about 9.2 percent of the company’s stock, according to data compiled by Bloomberg. Deason holds about 6 percent, according to a filing Monday.

Xerox shares closed up 1.2 percent at $29.95 in New York Monday, valuing the company at about $7.6 billion.

Xerox, the once-iconic American innovator that became synonymous with office copy machines, agreed last month to cede control to Japan’s Fujifilm. Under terms of the deal, Xerox would first merge with a joint venture the company operates with Fujifilm in Asia. Fujifilm would ultimately end up owning 50.1 percent of the combined entity, which expands the joint venture to encompass all of Xerox’s operations, the companies said. Xerox holders would receive a cash dividend of $9.80 a share under the proposed transaction.

“It really is a remarkable achievement by Fuji,” the two investors said. “Without putting up any cash, they will acquire majority control and ownership of a venerable American icon.”

In an emailed statement Monday, a spokesman for Norwalk, Connecticut-based Xerox said a comprehensive review conducted over “many months” by independent directors and advisers considered several options in detail and concluded the transaction with Fuji “is the best path to create value for Xerox shareholders.”

Investor Demands

“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,” the spokesman said.

Icahn and Deason demanded a complete and detailed disclosure of Xerox’s efforts to evaluate other indications of interest during the 46 days its spent negotiating the transaction. They also want to see what advice was given to the board about terminating or renegotiating its joint venture in Asia with Fuji in the wake of an accounting scandal there.

They also called for new leadership at Xerox and its board to reinvigorate the company.

“There is still great opportunity for Xerox to create enormous value for shareholders, and it does not involve selling control to Fuji without a premium,” the investors said. “Rather, it entails freeing the company from the shackles of the Fuji Xerox joint venture and bringing in leadership with the vision and operational expertise to revive the company.”

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