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Xerox pens reassuring letter to shareholders

March 8, 2018

In the lengthy letter, the OEM’s Board of Directors reinforces its belief in the significant benefits of the company’s proposed combination with Fuji Xerox.

The letter includes the following passages, with key phrases highlighted in bold:

“On January 31, 2018, Xerox announced its plans to combine with Fuji Xerox – the joint venture Xerox and Fujifilm established in Asia 56 years ago – to create a global leader in innovative print technologies and intelligent work solutions.

As a result of a comprehensive review of the Company’s strategic and financial alternatives, Xerox’s Board and management strongly believe that the combination with Fuji Xerox is the best path forward to create value for Xerox and its shareholders:

  • The combination creates significant immediate and long-term value for Xerox shareholders;
  • Xerox shareholders will be owners of a larger, stronger and more valuable company with enhanced prospects for growth and value creation;
  • Xerox and Fujifilm are already closely-aligned, and both have demonstrated track records of success in transformation;
  • The agreement establishes strong governance and ownership safeguards for current Xerox shareholders; and
  • The existing Fuji Xerox joint venture has been integral to Xerox’s competitiveness for many years, and the combination will optimize the benefits of this partnership for our Company.”

The Board then goes into much more detail, explaining, “The Transaction provides Xerox shareholders with significant value both at closing, which is expected to occur in the second half of 2018, and over time. This includes a substantial cash dividend that will be paid to Xerox shareholders contingent upon consummation of the Transaction, as well as the upside of a significant investment in a larger, stronger and more competitive company.”

The letter goes on to state, “The Transaction will create an industry leader with $18 billion (€14.5 billion) in revenue that is better positioned to compete and capture growth opportunities in the marketplace by leveraging the global reach, scale, technology and innovation strengths of the two companies. With direct access to high-growth markets in Asia Pacific, Xerox will operate as a truly global platform for the first time in its history.

Beyond the $1.25 billion (€1.008 billion) in cost synergies described above, we believe the combined company will have an improved revenue profile based on significantly strengthened manufacturing, distribution, innovation and R&D strategies, as well as improved cost competitiveness across global markets. This is expected to result in an at least $1.0 billion (€807.7 million) revenue expansion opportunity for the combined company. We believe the improved revenue trajectory will increase the valuation of the combined company, while enabling the vast majority of the cost savings to flow to the bottom line.”

The OEM also conjectures that “the combined company is expected to return to revenue growth by 2020, faster than Xerox could achieve on its own, and deliver industry-leading operating margins in the high teens by 2022.”

Xerox’s Directors also write in the letter, “Our longstanding relationships with Fujifilm and Fuji Xerox provide this combination with greater execution certainty than most M&A transactions. The companies have a long history of working together and know each other well. The combined company will have an experienced leadership team, led by Xerox’s CEO Jeff Jacobson, entirely committed to realising the full value potential of the new company.”




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