Xerox Terminates Acquisition by Fuji, Names New CEO, Board Members in Settlement With Activist Investors

CEO Jeff Jacobson is resigning for what appears will be for the second, but final, time.

It looks like the second time will prove to be the charm for activist investors Carl Icahn and Darwin Deason, who filed lawsuits and a proxy contest in vehement opposition to the proposed $6.1 billion acquisition of Xerox by Fujifilm Holdings that was first announced back in late January. After it appeared that the Xerox board of directors had reached a settlement on May 1 with Icahn and Deason - only to have it collapse - a new agreement reached yesterday terminates the Xerox transaction with Fujifilm that would have combined Xerox with Fuji Xerox, replaces Xerox CEO Jeff Jacobson with new CEO John Visentin, and appoints five new members to replace existing members on Xerox's board of directors.

Xerox entered into a new settlement agreement May 13 with major shareholders Icahn and Deason. The pact resolves the pending proxy contest in connection with the company’s 2018 annual shareholders meeting and ends Deason’s litigation against Xerox and its directors. It does not impact an existing lawsuit by Deason, or any claims by other Xerox shareholders, against Fujifilm for he calls "aiding and abetting." Various news outlets are reporting that Fuji, in response, is disputing Xerox's right to terminate the deal and says it is considering all options, including legal action seeking damages.

Under the terms of the settlement agreement with Icahn and Deason, the following occurred:

• Xerox appointed five new members to its board of directors: Jonathan Christodoro, Keith Cozza, Nicholas Graziano, Scott Letier and John Visentin (read Visentin's bio at end of article).
• Gregory Brown, Joseph Echevarria, Cheryl Krongard and Sara Martinez Tucker will continue to serve as members of the Xerox board of directors.
• Robert Keegan (Xerox chairman), Charles Prince, Ann Reese, William Curt Hunter and Stephen H. Rusckowski have each resigned from the Xerox board.
• Jeff Jacobson has resigned from his role as CEO and as a Xerox board member.
• Subsequent to joining the Xerox board of directors, Keith Cozza (see bio at bottom), CEO of Icahn Enterprises L.P., will be appointed as the new chairman of the board of directors of Xerox, and John Visentin will become the vice chairman and new CEO of Xerox.

John Visentin, a consultant to Icahn Capital, and a former IT exec at HP and IBM, is the incoming Xerox CEO.

In conjunction with the May 13 settlement, Xerox also notified Fujifilm that their previously announced transaction agreement is being terminated in accordance with its terms due to, among other things, the failure by Fujifilm to deliver the audited financials of Fuji Xerox by April 15, 2018, and the material deviations reflected in the audited financials of Fuji Xerox, when delivered, from the unaudited financial statements of Fuji Xerox and its subsidiaries provided to Xerox prior to the date of the agreement and taking into account other circumstances limiting the ability of a transaction to be consummated.

Original Terms of Fujifilm Acquisition of Xerox Agreement

The initial deal announced Jan. 31, 2018, had Fujifilm acquiring a 50.1% controlling interest in Xerox as part of a complex agreement tied in with their existing Fuji Xerox joint distribution venture for Xerox products in Asia and the Pacific Rim. Fuji owns 75% of that joint venture, with Xerox owning the remaining 25%. As part of the pact, Fuji Xerox would have taken a $6.1 billion loan to finance the repurchase of Fuji's 75% in Fuji Xerox, making Fuji Xerox a wholly owned subsidiary of Xerox. Thereafter, Xerox would then issue new shares of common stock to Fuji to represent a 50.1% stake worth $6.1 billion in value. The $6.1 billion would subsequently be used to repay the loan that Xerox had taken, with Xerox then borrowing $2.5 billion to pay to its shareholders as a special dividend. For Fuji, the transaction would not have required any cash outlay to Xerox shareholders.

As part of the newest agreement reached May 13, Xerox and Carl Icahn will also withdraw their respective nominations of any other director candidates for election at the 2018 Xerox annual shareholders meeting. And 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 shareholders until June 13, 2018. The shareholders meeting will be postponed to a later date.

The new Xerox board of directors plans to meet immediately and, among other things, begin a process to evaluate all strategic alternatives.

Outgoing Xerox Board Explains Why Fuji Deal Canceled

The former board of directors of Xerox provided the following statement:

“Over the past several weeks, the Xerox board has repeatedly requested that Fujifilm immediately enter into negotiations on improved terms for a proposed transaction. Despite our insistence, Fujifilm provided no assurance that it will do so within an acceptable timeframe. The Xerox board believes that the transaction cannot reasonably be expected to be completed under these circumstances, particularly given the court’s injunction of the transaction and the lack of shareholder support for the transaction on current terms, as well as the unresolved accounting issues at Fuji Xerox.

"The Board also considered the potential instability and business disruption during a proxy contest. Absent a viable, timely transaction with Fujifilm, the Xerox board believes it is in the best interests of the company and all of its shareholders to terminate the proposed transaction and enter a new settlement agreement with Icahn and Deason. Under the agreement, the Xerox board will be reconstituted to determine the best path forward to maximize value for Xerox shareholders.”

Carl Icahn has successfully blocked the acquisition of Xerox by Fuji and placed his own team at the helm of Xerox. | Credit: Twitter.com

Xerox's largest shareholder, Carl Icahn, as expected, was elated that an agreement had ultimately been reached. “We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm. With that behind us and new shareholder-focused leadership in place, today marks a new beginning for Xerox. We have often said that the most important person at a company (by far) is the CEO. We are, therefore, also pleased that John Visentin, a tried-and-true veteran in this area, will be taking the helm.”

Darwin Deason, Xerox's third largest shareholder - who with Icahn control a combined 15% ownership stake - was similarly satisfied. “With the limiting Fujifilm agreement terminated, Xerox is now positioned to conduct a true, robust strategic alternatives process. John Visentin has spent weeks preparing himself to run the company and speaking to numerous market participants regarding strategic alternatives. Xerox is fortunate to have someone with his experience and preparation to lead it through this exciting and transformative time.”

Darwin Deason has dropped his litigation against Xerox and its board members, but not against Fuji for "aiding and abetting." | Credit: King & Spalding

The agreement between Xerox, Icahn and Deason will be filed with the U.S. Securities and Exchange Commission.

It appears to end a contentious battle for control of Xerox, with so many twists and turns on a seemingly almost daily basis, it was beginning to sound like the plot for a fictional soap opera than a real-life Battle of the Boardrooms. Stay tuned, though, because the plot line now may only thicken in the coming months.

Bios of New Xerox Chairman of the Board and New CEO

Keith Cozza has been the president and CEO of Icahn Enterprises L.P. since February 2014. In addition, Cozza has served as COO of Icahn Capital LP, the subsidiary of Icahn Enterprises through which Carl Icahn manages investment funds, since February 2013. From February 2013 to February 2014, he served as executive VP of Icahn Enterprises. Cozza is also the CFO of Icahn Associates Holding LLC, a position he has held since 2006.

He has been a director of: Tropicana Entertainment, a company that is primarily engaged in the business of owning and operating casinos and resorts, since February 2014; and Icahn Enterprises L.P., since September 2012. In addition, Cozza serves as a director of certain wholly-owned subsidiaries of Icahn Enterprises L.P., including: Federal-Mogul Holdings LLC (formerly known as Federal-Mogul Holdings Corp.), a supplier of automotive power train and safety components; Icahn Automotive Group LLC, an automotive parts installer, retailer and distributor; and PSC Metals, a metal recycling company.

Cozza was previously: a director of Herbalife Ltd., a nutrition company, from April 2013 to April 2018; a member of the executive committee of American Railcar Leasing LLC, a lessor and seller of specialized railroad tank and covered hopper railcars, from June 2014 to June 2017; a director of FCX Oil & Gas, a wholly-owned subsidiary of Freeport-McMoRan Inc., from October 2015 to April 2016; a director of CVR Refining, LP, an independent downstream energy limited partnership, from January 2013 to February 2014; and a director of MGM Holdings., an entertainment company focused on the production and distribution of film and television content, from April 2012 to August 2012.

(Federal-Mogul, Icahn Automotive, CVR Refining, Icahn Enterprises, PSC Metals, and Tropicana are each indirectly controlled by Carl Icahn, and American Railcar Leasing was previously indirectly controlled by Icahn. Icahn also has or previously had non−controlling interests in Freeport-McMoRan, Herbalife and MGM Holdings through the ownership of securities.)

Cozza holds a B.S. in accounting from the University of Dayton.

Giovanni (“John”) Visentin was a senior advisor to the chairman of Exela Technologies and an operating partner for Advent International, where he provided advice, analysis and assistance with respect to operational and strategic business matters in the due diligence and evaluation of investment opportunities.

Visentin was also a consultant to Icahn Capital in connection with a proxy contest at Xerox Corp. from March 2018 to April 2018. In October 2013, he was named executive chairman and CEO of Novitex Enterprise Solutions following the acquisition of Pitney Bowes Management Services by funds affiliated with Apollo Global Management. In July 2017, Novitex closed on a business combination with SourceHOV, LLC and Quinpario Acquisition Corp. 2 to form Exela Technologies, becoming one of the largest global providers of transaction processing and enterprise information management solutions.

Visentin was previously an advisor with Apollo Global Management and contributed to its February 2015 acquisition of Presidio, a provider of professional and managed services for advanced IT solutions, where he was chairman of the board of directors from February 2015 to November 2017.

He has managed multibillion-dollar business units in the IT services industry (at each of Hewlett-Packard and IBM). Visentin graduated from Concordia University in Montreal with a bachelor degree of commerce.