Sunday evening’s news that Xerox (XRX 27.59,
-2.58, -8.6%) terminated its agreement with FUJIFILM (FUJIY
38.80, flat) brought cautious sentiment to the shares, leaving the stock down
more than 10% at one point on Monday.
The termination comes 10 days after Xerox and major shareholders Carl Icahn and Dawrin Deason failed to meet a deadline in a previously announced settlement agreement. Per that settlement, Xerox’s largest shareholders vied for the termination of Chief Executive Officer Jeffrey Jacobson and the replacement of a bevy of directors on the board. Icahn and Deason were opposed to the Xerox Fuji deal, and had released letters to shareholders voicing their concerns.
Per Sunday’s announcement, the agreement to combine Xerox with Fuji Xerox was terminated due to, among other things, the failure by Fujifilm to deliver the audited financials of Fuji Xerox by April 15, 2018. Xerox also pointed to “material deviations” reflected in the audited financials of Fuji Xerox, when delivered, from the unaudited financial statements it had received earlier from the party.
In lieu of the Fuji Xerox deal, XRX management opted to form a new settlement agreement with Carl Icahn and Darwin Deason. The settlement agreement resolves the pending proxy contest in connection with the company’s 2018 Annual Meeting of Shareholders and Mr. Deason’s litigation against Xerox and its directors. It does not affect any claims of Mr. Deason or other Xerox shareholders against Fujifilm for aiding and abetting. Per the terms of the settlement agreement:
- Xerox appointed five new members to its Board of Directors: Jonathan Christodoro, Keith Cozza, Nicholas Graziano, Scott Letier and John Visentin.
- Gregory Brown, Joseph Echevarria, Cheryl Krongard and Sara Martinez Tucker will continue to serve as members of the Xerox Board of Directors.
- Robert J. Keegan, Charles Prince, Ann N. Reese, William Curt Hunter, and Stephen H. Rusckowski each resigned from the Board of Directors of Xerox.
- Jeff Jacobson resigned from his role as Chief Executive Officer and as a member of the Board of Directors of Xerox.
Subsequent to joining the Xerox Board of Directors, Keith Cozza,
the Chief Executive Officer of Icahn Enterprises L.P.(IEP
67.20, -2.44, -3.5%), is expected to be appointed as the new Chairman of the
Board of Directors of Xerox, and John Visentin is expected to be appointed as
the Vice Chairman and new Chief Executive Officer of Xerox.
As part of the agreement, Xerox and Carl Icahn will withdraw their respective nominations of any other director candidates for election at the 2018 Annual Meeting of Shareholders. Xerox will continue to waive the advance notice bylaw to enable any Xerox shareholder to provide notice of intent to nominate directors for election at the 2018 Annual Meeting of Shareholders until June 13, 2018. The 2018 Annual Meeting of Shareholders will be postponed to a later date.
Now that a new board has been formed, the first matter of business is to meet to discuss strategic alternatives for the struggling office supply company.
Where Xerox stock goes in the next few months is anyone’s guess. Many on the Street are suggesting the company’s chances of finding another acquirer in the coming months may be in jeopardy following the termination of the Fuji deal, but perhaps Icahn can work his magic once again. Shares gave up their YTD gains today, now trading about -7.95% since the start of 2018. Into the weekend, shares had been sporting a 3.5% gain.