Xerox Crop (NYSE:XRX) has terminated its $6.1 billion deal with Fujifilm after agreeing with its two activist investors Carl Icahn and Darwin Deason. According to the billionaire activists, the transaction will underestimate the value of the company. The recent move ends the controversial infighting that has reigned for several months.
The company commented that for the past few weeks, it has tried to reach Fujifilm to consider improving the terms of the proposed transaction but to no avail. But Fujifilm has opposed Xerox’s decision to cancel the proposed transaction and would take actions against it including the legal action for the damages it has incurred.
Why the Deal was Cancelled
The two firms signed an agreement in January this year to create a joint venture Fuji Xerox. According to Xerox, the deal was terminated due to ‘material deviations’ and other malfunctions from the audited financial statements from its joint venture Fuji Xerox.
Xerox claims that Fujifilm failed to meet the deadline for submission of the audited financial information for Fuji Xerox, which was on or before April 15. Fujifilm provided no assurance that it’s committed to honoring the stipulated timeframe despite Xerox efforts to reach the firm on time.
However, Icahn and Deason who owns about 15% Xerox shares intervened to halt the deal from going through. The recent move will make Xerox sale to go higher in an auction in the near future.
The two activist investors were unhappy with the structure of the joint structure and are concerned about the potential changes that would be brought to the existing business of the company. Icahn and Deason demand an all-cash bid of about $40 per share while Fujifilm is opting for $28 per share, which is too low and it’s not available in cash.
The Two Firms Are Inseparable
However, according to market analysts, the two companies are inseparable and that there are no other potential buyers than what Fujifilm could offer. Though Icahn and Deason believe the price should be higher than what Fujifilm is negotiating for. Xerox stated that its board of directors would be meeting soon to begin the process of evaluating all the possible options available to maximize its shareholders’ value.