Bloomberg, in a report, said that Xerox is ceding all control to Fujifilm Holdings Corp. The iconic American company whose name has now become a verb gave over control to the Japanese photography and imaging giant to become a part of a newly created $18 billion company.
Xerox has a market value of about $8.3 billion and will first be merged with the joint venture that the company operates in Asia with Fujifilm called Fuji Xerox. As a part of the deal, Xerox shareholders will be awarded a cash dividend at the rate of $9.80 a share. Fujifilm will eventually take over 50.1% ownership of the joint venture, which will include the entirety of Xerox’s operations. The total deal comes to about $6.1 billion and is expected to be completed by July-August of this year.
Xerox has been a household name since the start of the 20th century. Its machines and hardware – especially its copiers – were household names. The company also invented the first generation graphic interface and mouse that is now so much a part of a PC. Sadly, the company began to struggle as Canon and other Asian competitors ate into its market share. The advent of email and other types of electronic communication finally killed its market share.
Carl Icahn, one of Xerox’s activist investors and biggest single shareholder, had been pressuring the company to look at various options that could help the company survive. This included the joint venture with Fujifilm and appointing four new directors to the company’s board. Another investor in Xerox, Darwin Deason, along with Icahn, also fought to have current Chief Executive Officer Jeff Jacobson removed from office. Icahn is now slated to become the next CEO of the new company created through this deal – which will retain the name of the earlier JV – Fuji Xerox.
Despite all the steps being taken to bolster the business, it is not going to be saved, according to Argus Research Corp. analyst Jim Kelleher. This is because the copier and office equipment industry as a whole is dying. He stated felt that Icahn knew that this deal isn’t going to transform the company. Rather, it is going to simply help boost stock prices a little.
Xerox saw a rise in share prices after the announcement of this deal with Fujifilm. The company’s stocks rose by 4% to trade at $33.99, before dropping back to $31.63 by the end of the week.
Fujifilm stated that this joint venture would remove 10,000 jobs in the Asian market as a part of the re-structuring effort to deal with a “severe” market. According to CNBC, Xerox has been struggling to find new sources of growth and Fujifilm has been trying to restructure its copier business to focus more on document solutions. The Japanese company reported a drop of 29.4% in sales for the last quarter. However, the company’s imaging and information segments managed to pull up the Fujifilm’s earnings to show a 3.4% increase in overall operations profits for the quarter.
Besides the job cuts, Fuji Xerox will also consolidate its R&D, procurement and a few other operations. This would give the company a cost savings of about $1.7 through to 2022.
After this deal, Fujifilm will own 75% of Fuji Xerox, a joint venture that has been a 50 year old partnership between the two companies. Fuji Xerox will have dual headquarters in New York and Tokyo. The new company’s Chairperson will be Fujifilm CEO Shigetaka Komori. This new joint venture will account for almost half of the Japanese company’s sales as well as operating profits.