Fujifilm gives Xerox six months to resurrect $6bn tie-up

Fujifilm Holdings will consider giving up the fight to resurrect its $6.1bn bid for control of Xerox if there is no progress in talks within the next six months, its chief executive has said. 

The Japanese group has been making preparations to sue the US printer and photocopier maker after it abruptly called off the deal in mid-May in a settlement with two of its biggest investors, Carl Icahn and Darwin Deason.

Fujifilm maintained that Xerox did not have the right to unilaterally terminate the agreement they struck in January. 

“Our basic stance is to urge Xerox to implement the deal both companies agreed with,” Shigetaka Komori, the 78-year-old chairman and CEO of Fuji, said on Thursday.

“But if nothing happens in six months, that’s just too bad,” Mr Komori said in his first public statements since Xerox called off the deal.

The transaction would have seen Xerox merge its business with a joint venture the company operates with Fuji in Asia, handing Fuji majority control. Xerox investors were to receive a $2.5bn cash dividend as part of the deal. 

But Mr Icahn, an activist investor, and Mr Deason, a businessman, criticised the sale as undervaluing Xerox, attacking the complex structure that would allow Fuji to execute the deal without using its own cash. 

Following a messy dispute, Xerox fired its then chief executive, Jeff Jacobson, as part of its settlement with the activists. He was replaced by former IBM and Hewlett-Packard executive John Visentin, while Keith Cozza of Icahn Enterprises became chairman. In addition, Xerox appointed a new slate of directors that will give Mr Icahn greater power to control the company’s direction.

On Thursday, Mr Komori said he had not been approached by the new Xerox board, but left open the possibility of renegotiating the deal if the terms were not disadvantageous for Fuji’s shareholders. 

Mr Komori indicated that he may be open to studying a new proposal that included an increase in the cash dividend, although he ruled out significantly altering the current scheme. 

The divide between Fuji and the activists remains wide. Mr Icahn and Mr Deason have said they would consider an all-cash bid of at least $40 per share, which would be a 43 per cent premium to Fuji's offer.

“$40 is too high,” Mr Komori said, noting that the company needed to reserve cash to invest in other growth businesses such as healthcare. “If the maths don’t work out, we can’t do it.”

The Fuji-Xerox joint venture, which dates back to 1962, has grown to generate almost half of Fuji’s revenues. But the Japanese group also develops and manufactures most of Xerox’s copiers, making it difficult for the US company to call off the partnership even if the deal falls apart.