Top Xerox Shareholder Asks Court to Block Fujifilm Merger

FILE – This Tuesday, May 24, 2016, file photo shows Xerox copiers at a store in North Andover, Mass. Top shareholder Darwin Deason seeks to block a proposed merger with camera company Fujifilm. (AP Photo/Elise Amendola, File)

(CN) – Xerox’s third-largest shareholder doubled down Tuesday on an open letter opposing Japan-based Fujifilm’s $6 billion takeover of the print company by accusing executives of defrauding investors.

Darwin Deason claims in a lawsuit filed Tuesday in New York County Supreme Court that Fujifilm, also known simply as Fuji, will acquire his company for “virtually nothing” and that Xerox executives sanctioned a deal that puts their interests above shareholders.

“If the deal is consummated, Xerox shareholders will be virtually powerless over the future direction of their investment and will have no opportunity to receive a true control premium for their shares. Accordingly, the transaction must be stopped dead in its tracks,” the 35-page complaint states.

Represented by attorney Israel Dahan of King & Spalding, the shareholder seeks a court order blocking the proposed transaction.

Deason says that Xerox and Fuji executives dashed any hope of a “transparent and fair sale process” when they failed to disclose a 17-year-old “crown jewel lock-up agreement.”

The agreement gives Fuji control of Xerox’s intellectual manufacturing and intellectual property rights in the Asia-Pacific market “in the event Xerox were to sell just 30 percent of the company to another suitor,” according to the complaint.

“In fact, the ‘end game’ for Xerox – a sale to Fuji – was decided 17 years ago with this undisclosed ‘crown jewel’ lock-up right granted to Fuji, and shareholders had absolutely no clue,” the lawsuit states.

Deason’s complaint follows an open letter published Monday that he co-wrote with fellow Xerox shareholder Carl Icahn criticizing the deal.

“To put it simply, the current board of directors has overseen the systematic destruction of Xerox, and, unless we do something, this latest Fuji scheme will be the company’s final death knell. We urge you – our fellow shareholders – do not let Fuji steal this company from us. There is still tremendous opportunity for us to realize value on our own if we bring in the right leadership,” the shareholders said in a joint statement.

On Jan. 31, Xerox announced that shareholders will receive a $2.5 billion special cash dividend or close to $9.80 per share if the deal closes, with Fuji taking a majority 50.1 percent stake in the joint venture.

The new company will have headquarters in Norwalk, Conn., and Tokyo’s Minato Ward while maintaining both companies’ brands.

Responding to Deason’s lawsuit, Xerox said that the claims are without merit and that it would “vigorously defend itself.”

“It is unfortunate that Mr. Deason is seeking to interfere with Xerox shareholders’ right to decide and is relying on meritless legal claims. Xerox has fully disclosed the joint venture agreements, and the company will respond to Mr. Deason’s legal claims through the appropriate legal channels in due course,” the company said a statement.

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