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Xerox to combine with Fuji Xerox

In a statement the company says the move creates substantial value for Xerox employees, customers, business partners and shareholders


Xerox and Fujifilm revealed that they have entered into a definitive agreement to combine Xerox and their longstanding Fuji Xerox joint venture. The announcement follows reports that two Xerox Corp shareholders Carl Icahn and Darwin Deason, had joined forces to lobby the US printer OEM to put itself up for sale and get rid of its chief executive.

The transaction has been unanimously approved by the boards of directors of both Fujiflm and Xerox. In a statement, Xerox said that the combined company will be a global leader in innovative print technologies and intelligent work solutions, with annual revenues of $18 billion and leadership positions in key geographic regions. It will have enhanced global scale and reach, world-class innovation capabilities and an improved financial profile to provide flexibility to support strategic investments in growth and attractive capital returns.

The combined company will have dual headquarters in Norwalk, CT and Minato, Tokyo, Japan, will be named Fuji Xerox, and will maintain both Xerox and Fuji Xerox brands within its respective operating regions.

The new Fuji Xerox will be well positioned to lead in growing areas such as high-speed inkjet, packaging, industrial print and workplace automation, as well as future development opportunities in artificial intelligence, machine learning, internet of things and augmented reality.

This proposed combination provides Xerox shareholders with significant cash at closing, as well as a substantial interest in the significantly enhanced combined company.

Under the terms of the agreement, Xerox shareholders will receive a $2.5 billion special cash dividend, or approximately $9.80 per share, funded from the combined company’s balance sheet, and own 49.9 per cent of the combined company at closing. The cash dividend represents more than 30 per cent of Xerox’s unaffected share price of $30.35 based on closing share price as of January 10, 2018. Fujifilm will own 50.1 per cent of the combined company and provide important operational support and transformational leadership.

Significant growth and productivity opportunities:

Jeff Jacobson, Chief Executive Officer of Xerox, said: “The proposed combination has compelling industrial logic and will unlock significant growth and productivity opportunities for the combined company, while delivering substantial value to Xerox shareholders.

“The new Fuji Xerox will be better positioned to compete in today’s environment with truly global scale, increased presence in fast-growing markets, and innovation capabilities to effectively meet our customers’ rapidly evolving demands. In addition, the combined company’s strong financial profile will enable investments that support continued market leadership, while also providing opportunities for increasing capital returns over time.”

It’s been just over a year since the company completed its spin-off of Conduent as a business process services company, while Xerox retained the hardware business, a move that it said would allow it to focus on growing its global leadership in digital print technology and services.

Robert J. Keegan, Chairman of Xerox’s Board of Directors, said: “The announcement follows a comprehensive review of our strategic and financial alternatives led by Xerox’s independent directors that began after the separation of Conduent. Upon careful consideration of all alternatives available to the company, the board of directors concluded that this combination is clearly the best path to create value for our shareholders. An attractive, certain cash dividend, together with participation in the future success of the combined company, presents a compelling value equation for Xerox shareholders. We are excited to strengthen our longstanding relationship with Fujifilm as we enter the next phase of Xerox’s transformation journey.”

Value creation:

This combination is expected to deliver at least $1.7 billion in total annual cost savings by 2022, with approximately $1.2 billion of the total cost savings expected to be achieved by 2020. The targeted cost savings represent approximately 10 per cent of the total cost base of the new Fuji Xerox and will drive significant margin expansion over the next four years.

Of the total $1.7 billion cost savings, $1.25 billion is related to the synergies that will be achieved through the transaction. In addition, the combined company will benefit from a cost reduction program commencing immediately at the existing Fuji Xerox joint venture, which is targeted to generate approximately $450 million of cost savings on an annualised basis. These amounts are incremental to Xerox’s ongoing strategic transformation initiatives. The new company expects to incur approximately $1.4 billion in onetime integration and restructuring costs, mainly in the first three years.

The new Fuji Xerox will also have significant revenue synergy opportunities over time as it capitalises on its global reach, industry-leading scale and enhanced innovation capabilities. Importantly, the combined company will have an increased total addressable opportunity estimated at nearly $120 billion and a strong presence in attractive growth markets, allowing the new company to become more competitive and better able to serve customers and business partners globally.

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