Dissident shareholders Icahn and Deason post $150 million to preserve injunction after last week’s Xerox management about-face

In the next “episode” of the rapidly changing and unpredictable Fuji-Xerox takeover “melodrama” (the twists and turns of which have been reported several times in the past few weeks on this site), Xerox late last week petitioned the New York State Supreme Court to rescind the injunction preventing Fujifilm from proceeding with its acquisition of Xerox. Result? The court has denied Xerox’s request, which maintains the injunction granted to Xerox dissident shareholders Carl Icahn and Darwin Deason (15% owners who opposed the deal from the start). In the latest development, Icahn and Deason have now posted a $150,000,000 bond and declared a $40 per share minimum for a credible Fuji offer. The court has set a date of September, 2018 to further consider the injunction. All this was in response to the Xerox Board’s about-face last Thursday, to its prior agreed announcement that Xerox’s best interest would be served with a new CEO, Chairman and Board members. Icahn and Deason have now released their latest open letter to all Xerox shareholders. (Editor’s note: I’ve already lost enough hair scratching my head over this back-and-forth between billionaires and multi-million-dollar companies, but I’m compelled to report it). At any rate, here’s a portion of that letter:

Carl Icahn.
Carl Icahn.

“Fellow Shareholders…..This morning we furthered our commitment to holding Xerox, its current board of directors and Fuji accountable for their egregious actions by posting a $150,000,000 bond to preserve the two preliminary injunctions issued by the New York State Supreme Court in the litigation brought by Darwin Deason against them. In a blistering opinion issued in that case, the judge concluded that the Fuji deal was so tainted with conflict, that it was likely that {Xerox} CEO Jeff Jacobson and the board, aided and abetted by Fuji, had breached their fiduciary duties owed to Xerox shareholders. The first injunction bars Xerox from holding a shareholder vote on the mind-numbingly complex Fuji transaction. The second injunction bars Xerox from enforcing its advance notice bylaw. This means that the lame-duck board may no longer deny shareholders their fundamental right to nominate an alternative slate of directors who are committed to enhancing value for ALL shareholders rather than rushing into a no-premium deal with Fuji to further their own personal interests.

Darwin Deason.
Darwin Deason.

The Deason litigation matters now more than ever. As we write this letter, the lame-duck Xerox board is filing an appeal to fight the judge’s clear and definitive opinion, an action done solely to look out for themselves individually and to help their partner, Fuji. This appeal allows Fuji to have a hand in deciding the future of Xerox, which is both unconscionable and inappropriate. The future of Xerox should be decided by Xerox shareholders and its board, not a third party that has a track record of underhanded and one-way dealings with Xerox. This appeal is yet another mind-boggling example of this lame duck board choosing itself, and Fuji, over Xerox shareholders.” The letter went on to quote various experts in the printing industry who agree with them. It continued, in part…..

“We see several paths to victory – but none of them involve selling a 50.1% interest in Xerox in a deal that offers no control premium and leaves shareholders vulnerable to oppression by an overlord that is embroiled in an ever-widening accounting scandal. We are aware of the market speculation regarding a rival bid by Apollo, and we are confident that other potential buyers are waiting in the wings to kick the tires – but we do not see any possibility of an alternative bid materializing unless and until the lame-duck board and the lame-duck CEO relinquish their death grip on Xerox. To put to rest the speculation regarding our intentions, we are comfortable stating that an all-cash bid at a minimum of $40 per share, would require our serious consideration. However, we also see the possibility of similar or better value in a standalone Xerox, with John Visentin at the helm as CEO with the support of a new conflict-free board…..”

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Tony Curcio is the editor of Graphic Arts Magazine.