Fujifilm isn’t taking things sitting down after Xerox backed out of a merger that had been planned between the two companies.
Fuijfilm is suing Xerox for over $1 billion for the move and has filed a lawsuit in a district court in New York this month.
The company is seeking “”punitive damages for Xerox’s intentional and egregious conduct” for the company pulling out of the deal.
Fuji Xerox was expected to merge with Xerox in order to give Fujifilm full control of the combined company but Xerox pulled out of the deal on May 13th.
The deal didn’t go as planned after Xerox backed out. Activist investors Carl Icahn and Darwin Deason were vehemently against the deal from happening. Both own 15% of Xerox between them.
According to the two investors, the deal would have undervalued Xerox.
While Fujifilm wasn’t happy with the outcome, Xerox stated that it was “extremely confident” about having its right to cancel the deal.
The company said it would seek remedies for Fujifilm’s “mismanagement and misconduct.”
The termination fee of the deal was at $183 million, which both companies agreed on if one company walked away. So why is the lawsuit for $1 billion? Fuji argues that Xerox has taken away the potential benefits it would have seen if the deal had remained.
Fujifilm is also after the termination fee though as well. The company stated, “It is inconsistent with shareholder democracy to allow Carl Icahn and Darwin Deason, minority shareholders with only 15% of Xerox’s shares, to dictate the fate of Xerox.”
Fuji has also said, “This change of heart is undoubtedly due to external pressures. Xerox has recently been subject to the whims of activist investors Carl Icahn and Darwin Deason, who, notwithstanding their minority ownership of Xerox shares, have yanked the Xerox Board in more directions than can be counted.”
The lawsuit states, “The true reason for Xerox’s purported termination … is the simple truth that the Xerox Board changed its mind — as induced by [shareholder activist Darwin] Deason and Icahn.”
Icahn and Deason now have control of the Xerox board and are seeking a better price for the company. It was in January that Xerox said it reached a deal to sell 49.9 percent of the company to FujiFilm for about $32 a share.
Robert Schiffman, Bloomberg Intelligence senior credit analyst as well as Mike Campellone, BI credit associate analyst, have said, “If a white-knight strategic buyer doesn’t emerge, non-investment grade rating action risk looms large.”