Fujifilm has embarked on a staged acquisition of the Xerox corporation which will see it almost double its size to roughly match the scale of Canon.
Xerox will first merge with a joint venture Fuji Xerox, which it operates with Fujifilm in Asia (including Australia and New Zealand). Fujifilm will ultimately end up owning 50.1 per cent of the combined entity, which will encompass all of Xerox, and be a direct subsidiary called Fuji Xerox.
There will be significant job losses in Australia as a result of the acquisition. Fujifilm said it was cutting 10,000 jobs at Fuji Xerox – more than a fifth of its workforce – in the Asia Pacific region.
A $450 million accounting scandal at Fuji Xerox in New Zealand and Australia – regarded as so serious by Fujifilm Holdings that it postponed announcement of its own financial results for three months – could be seen as a factor in Fujifilm’s decision to take direct control of the ailing copier business.
The accompanying press statement from Fujfilm states the new entity will take ‘the advanced technology held by Fujifilm in areas such as photographs, inkjet, photolithography, and optical, and the technology held by New Fuji Xerox in the document
area, then leveraging these technologies to form a combination that competitors do not have, realize innovative product development and expand market domains.’
The new, expanded Fujfilm now has the scale of Canon, and becomes a direct competitor to Canon in the copier market as well as cameras and lenses.
Fujifilm claims that combining R&D, procurement and other operations would deliver Fuji Xerox a cost saving of at least US$1.7 billion in total cost savings by 2022.
But wait…
However, there may be a legal challenge to the acquisition. Class action specialist Levi & Korsinsky is trolling for clients and has commenced an investigation into the fairness of the sale. Under the terms of the transaction, Xerox shareholders will receive a $2.5 billion special cash dividend representing approximately US$9.80 per share. Levi & Korensky reckon that’s on the low side, and so unfair to shareholders.
‘The investigation concerns whether the Board of Xerox breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into this transaction, and whether Fujifilm Holdings Corporation is underpaying for Xerox shares, thus unlawfully harming Xerox shareholders,’ the law firm’s announcement states.
Fujifilm paid US$6.1 billion for the Xerox company, although it’s market capitalisation on the day of acquisition was US$8 billion.
Fuji has figured out how to do well in a mature market. This bodes well for Xerox if Fuji can apply their expertise there. Xerox is a good vendor for us and there is tremendous value in their operation. We just hope they don’t fall to “financial engineering” but it looks like they escaped that danger zone.