Xerox Makes Peace with FUJIFILM Via $2.3B in Transactions; Reportedly Eyes HP Takeover

John Visentin, Xerox Corp.

Following nearly two years of legal wrangling over a proposed $6.1 billion sale to Fuji Xerox that fell apart, it appears Xerox and FUJIFILM have finally done business. No sooner than the deal was inked, however, that reports began to swirl regarding Xerox’s interest in acquiring HP.

Xerox announced Tuesday that it has entered into agreements with FUJIFILM Holdings Corporation and certain of its subsidiaries that will simplify and set a new course for the companies’ strategic sourcing relationship going forward. The terms of the agreements include the following:

  • Sale of Xerox’s 25% stake in Fuji Xerox Co., Ltd. (FX) to a subsidiary of FUJIFILM;
  • Modified sourcing terms for future product programs that will ensure Xerox’s product supply continuity;
  • Sale to an affiliate of FX of Xerox’s 51% stake in Xerox International Partners (XIP), an OEM joint venture between Xerox and FX, which, together with the grant of a new IP license, will allow FX to OEM certain products (such as printer engines) to named parties that are existing customers of XIP on a worldwide basis in exchange for a fixed royalty; and
  • Dismissal of the $1 billion lawsuit FUJIFILM filed against Xerox after last year’s terminated merger.

Also, the Wall Street Journal reported Xerox’s board of directors is mulling a cash-and-stock offer to obtain HP. The offer would reportedly represent a premium to HP’s $27 billion market value (three times the size of Xerox). Funding for the transaction lies in an informal commitment from a major bank.

In a statement issued by the company, HP acknowledged receiving the overture.

“As reviewed at HP’s most recent Securities Analyst Meeting, we have great confidence in our multi-year strategy and our ability to position the company for continued success in an evolving industry, particularly given the multiple levers available to drive value creation.

“Against this backdrop, we have had conversations with Xerox Holdings Corporation (NYSE: XRX) from time to time about a potential business combination. We have considered, among other things, what would be required to merit a transaction. Most recently, we received a proposal transmitted yesterday.  

“We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders.”

As for the FUJIFILM resolution, the deals permit both firms to move forward while still leveraging future opportunities with one another.

“These agreements reset our relationship with FUJIFILM and provide both companies with tremendous opportunities to grow, together and independently,” said John Visentin, vice chairman and CEO of Xerox. “These agreements also unlock significant unrealized value for our shareholders, provide greater clarity for our customers and help us speed our transformation to a digital-first company.”

Total after-tax proceeds to Xerox from the transactions will include accrued but unpaid dividends through the date of the closings and are expected to be approximately $2.3 billion. Xerox expects to use the proceeds opportunistically to pursue accretive M&A in core and adjacent industries, return capital to shareholders and pay down its $550 million December 2019 debt maturity.

The agreements were unanimously approved by the board of directors of Xerox and do not require a shareholder vote. Closings of the sale transactions are subject to receipt of regulatory approval in Japan and other customary closing conditions and are expected to occur in November 2019, but there can be no assurance regarding timing of completion of the regulatory review process, which could delay timing of the closings.

Xerox expects to provide updated 2019 guidance by mid-December 2019 that incorporates the impact of the transactions (assuming closing of the transactions occurs as expected).

King & Spalding LLP acted as legal counsel to Xerox in connection with the transactions.


About Xerox
In the era of intelligent work, we’re not just thinking about the future, we’re making it. Xerox Holdings Corporation is a technology leader focused on the intersection of digital and physical. We use automation and next-generation personalization to redefine productivity, drive growth and make the world more secure. Every day, our innovative technologies and intelligent work solutions—Powered by Xerox—help people communicate and work better.