It’s a momentous moment in the history of mergers and acquisitions as Xerox and Fujifilm have agreed to combine Xerox with the companies’ longstanding Fuji Xerox joint venture.
As Japan’s Fujifilm Holdings assumes full ownership of Xerox Corp., the combined company will operate as Fuji Xerox. It boasts combined annual revenues of $18 billion—despite Xerox reporting a fourth quarter loss—and leadership positions in key geographic regions.
Fujifilm, which already owned 75% of Fuji Xerox, is acquiring the remaining 25% in a deal valued at $6.1 billion, using bank debt to finance a transaction that is projected to close in the third quarter.
“Building on the positive momentum from 2017, today we announced an agreement to combine with Fuji Xerox to create a world leader in innovative print technologies and intelligent work solutions. The new company expands the long-standing relationship between Xerox and Fujifilm, and will be better positioned to meet customer expectations and deliver incremental value to our shareholders.”
FUJIFILM Holdings and Xerox Announce Agreement to Combine Fuji Xerox Joint Venture with Xerox. https://t.co/XwkQhtO8uk
— Xerox (@Xerox) January 31, 2018
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The goal is to augment scale and reduce costs in a declining office printing market. Consolidating R&D, procurement and other operations will enable Fuji Xerox to save $1.7 billion by 2022.
Fujifilm CEO Shigetaka Komori will serve as chairman of the new Fuji Xerox, commenting to Reuters, “This has been a speedy decision, but I believe it’s a creative one. The new structure will leverage the strengths of our three companies.”
“The proposed combination has compelling industrial logic and will unlock significant growth and productivity opportunities for the combined company, while delivering substantial value to Xerox shareholders,” said Xerox CEO Jeff Jacobson, who will become CEO of the combined company.
Cities with employees potentially affected are naturally concerned about looming job losses, as Rochester Chamber of Commerce CEO Bob Duffy expressed:
Xerox shareholder Darwin Deason and Carl Icahn, its biggest shareholder with a 9.72% stake, joined forces last week to call on Xerox to explore strategic options and oust its “old guard,” including its CEO.
Xerox invented laser printers, the graphical user interface with mouse, graphical text editor and ethernet; now it’s part of Fuji, a printing company. Fujifilm and Xerox created Fuji Xerox in 1962 in a 75/25-percent joint venture operating mostly in the Japan/Asia-Pacific region, while Xerox kept its own footprint in the U.S.
The new company will close several Fuji Xerox factories and eliminate about 10,000 jobs by 2020, primarily in the Asia Pacific region, one-fifth of its global workforce.
TechCrunch notes, “In spite of all of this, Fujifilm appears to be bullish in its projections. “The combined company is expected to deliver a total of USD $1.7 billion in total annual cost savings by 2022,” the company writes in a release, “with approximately $1.2 billion of the total cost savings expected to be achieved by 2020.”
The agreement marks the beginning of the end an era for a U.S. company that began in the early days of the 20th century and grew to fame for its copiers, reaching that rare status of a product becoming a verb.
But as competitors like Canon and others in Asia emerged, along with adoption of email and digital platforms, the behemoth waned in power.
Fujifilm executives are confident shareholders will approve the dea,l which will trade on the New York Stock Exchange and have headquarters in Norwalk, Connecticut, and Tokyo.
The new company will shift focus to managed-print services and medical imaging, expanding into the burgeoning health-care sector with ultrasound and endoscope equipment.
“This transaction… offers substantial upside for shareholders of the combined companies, including current shareholders of Xerox and Fujifilm Holdings, who will own shares in a more competitive company that has enhanced opportunities for long-term growth and margin expansion,” Jacobson told Reuters.
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