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Icahn and Deason trade blows with Xerox

February 21, 2018


The increasingly bitter battle has continued, with a new joint letter followed by a swift response from the OEM.

Xerox shareholders Carl Icahn and Darwin Deason have launched their latest attack on the OEM’s deal with Fujifilm. In a letter published yesterday, the pair further insisted that Xerox’s shareholders should reject the proposed partnership, and instead consider selling the company elsewhere. It follows many other letters of criticism from the two men over previous months, the most recent coming last week. That was followed by a lawsuit brought against the company by Deason, which Xerox flatly condemned.

The new broadside, published this week, loudly declares that “there are viable alternatives to the proposed Fuji scheme”, and that shareholders “will be exponentially better off if the Fuji scheme is not consummated.” It also sets out a series of assertions made by the couple, “that demonstrate unequivocally how poorly the Board has handled the current situation and how terrible this latest Fuji scheme is for shareholders.”

The facts include the claim that “Fuji needs Xerox more than Xerox needs Fuji,” and that the current joint venture agreements are “awful”, other it stipulates that many alternatives are still available to the Connecticut-based OEM. Other facts given state plainly that “the Board’s math is wrong”, something which the pair label “unforgivable”, and that “the Company uses ‘suspect math’” – an accusation previously levelled at Darwin and Icahn themselves, the letter alleges.

Looking ahead, the duo also claim that Fuji “will not bear the debt that will finance our dividend” and that should the deal overcome the final hurdle of receiving shareholder approval, “the Board’s ‘strong minority protections’ will not prevent Fuji from oppressing us.”

If the deal goes ahead, “the existing Xerox shareholders will never have an opportunity to receive a true control premium for our shares. The Board says our claim is ‘false’ but provides little reasoning as to why that’s the case,” the pair write. “The truth is that there are myriad ways Fuji could oppress us as minority shareholders.”

The missive also takes aim at Xerox’s latest letter to its shareholders, which Icahn and Deason describe as “rife with misleading obfuscations, basic mathematical errors and convenient omissions” – particularly the suggestion that both men were in a position to know the full terms of the joint venture, something which they have demanded to know on repeated occasions previously. The OEM contends that with Jonathan Christodoro, a representative of Icahn, serving on the Board for eighteen months, and with Deason obtaining access to all documents when selling ACS to Xerox in 2010, neither shareholder was being kept in the dark.

The co-signed letter finishes by suggesting: “Xerox could combine with a competitor that’s actually willing to pay a significant premium, or Fuji themselves would step up and offer a full buy-out on fair terms. But even if neither of those things happen, just diversifying away from Fuji over time, thereby gaining unfettered access to Asia, and bringing in new management with vision and operational expertise would be infinitely better than the awful deal that’s being proposed today.”

Xerox, however, were quick to respond to the latest diatribe, with a company statement calling the letter “consistent with their misguided campaign to undermine Xerox’s combination with Fuji Xerox.”

It goes on to reaffirm that the joint venture with Fuji Xerox “will create a global industry leader” that “maximises the new company’s ability to innovate and compete in today’s market.” It further describes the deal as both “the superior path forward for Xerox” and a “significant opportunity for shareholders.”

The statement concludes: “The Xerox Board and management team remain focused on delivering value for shareholders through this transaction and the ongoing improvement of our business. We will continue to engage directly with our shareholders on the merits of the transaction.”

It appears that despite the OEM’s speedy rebuttal of Icahn and Deason’s latest epistle, the war of words between the Xerox and two of its largest shareholders is not over yet.

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