Creates a Global Leader in Innovative Print Technologies and
Intelligent Work Solutions
- Xerox shareholders to receive a $2.5
billion special cash dividend, or approximately $9.80 per share1,
and 49.9% of the combined company; Fujifilm to own 50.1%
- Combined company to deliver at least
$1.7 billion in total cost savings, with $1.2 billion to be
achieved by 2020
- Accelerates path to revenue growth
through global reach, industry-leading scale and enhanced
innovation capabilities
- Well-positioned to lead in growing
business areas such as high-speed inkjet, industrial print and
workplace solutions, while leveraging Fujifilm's extensive
technologies
- Combined company will have enhanced
financial flexibility for future growth investments and capital
returns
- Combined company will have dual
headquarters in Norwalk, CT, U.S. and Minato, Tokyo, Japan, and
will maintain the iconic “Xerox” and “Fuji Xerox” brands within its
respective operating regions
FUJIFILM Holdings Corporation (“Fujifilm”) (TSE:4901) and Xerox
Corporation (“Xerox”) (NYSE:XRX) today announced that they have
entered into a definitive agreement to combine Xerox and their
longstanding Fuji Xerox joint venture. The combined company will be
a global leader in innovative print technologies and intelligent
work solutions with annual revenues of $18 billion and leadership
positions in key geographic regions.
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This proposed combination provides Xerox shareholders with
significant cash at closing, as well as a substantial interest in
the significantly enhanced combined company. Under the terms of the
agreement, Xerox shareholders will receive a $2.5 billion special
cash dividend, or approximately $9.80 per share1, funded from the
combined company’s balance sheet, and own 49.9% of the combined
company at closing. The cash dividend represents more than 30% of
Xerox’s unaffected share price of $30.35 based on closing share
price as of January 10, 2018. Fujifilm will own 50.1% of the
combined company and provide important operational support and
transformational leadership.
The transaction has been unanimously approved by the Boards of
Directors of both Fujifilm and Xerox. The combined company will be
named “Fuji Xerox” and trade on the NYSE under the ticker XRX. The
new Fuji Xerox will have dual headquarters in Norwalk, CT, U.S. and
in Minato, Tokyo, Japan, with presence in over 180 countries. The
combined company will go to market and maintain the iconic “Xerox”
and “Fuji Xerox” brands within its respective operating
regions.
Shigetaka Komori, chairman and chief executive officer of
Fujifilm, said, “Fujifilm and Xerox have fostered an exceptional
partnership through our existing Fuji Xerox joint venture, and this
transaction is a strategic evolution of our alliance. The Document
Solutions business represents a significant part of Fujifilm’s
portfolio, and the creation of the new Fuji Xerox allows us to more
directly establish a leadership position in a fast-changing market.
We believe Fujifilm’s track record of advancing technology in
innovative imaging and information solutions – especially in
inkjet, imaging, and AI areas – will be important components of the
success of the new Fuji Xerox.”
Mr. Komori added, “I am confident that Fujifilm’s ability to
drive change as well as its experience of successful reinvention
will give a competitive edge to the new Fuji Xerox, delivering
significant value creation to shareholders of both the new Fuji
Xerox and Fujifilm. We are delighted to welcome Xerox and its
employees to the Fujifilm family and look forward to combining our
strengths towards jointly shaping the future of our industry.”
Jeff Jacobson, chief executive officer of Xerox, said, “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. The new Fuji Xerox will be better positioned to
compete in today’s environment with truly global scale, increased
presence in fast-growing markets, and innovation capabilities to
effectively meet our customers’ rapidly-evolving demands. In
addition, the combined company’s strong financial profile will
enable investments that support continued market leadership, while
also providing opportunities for increasing capital returns over
time.”
Robert J. Keegan, chairman of Xerox’s Board of Directors, said,
“Today’s announcement follows a comprehensive review of our
strategic and financial alternatives led by Xerox’s independent
directors that began after the separation of Conduent in 2016. Upon
careful consideration of all alternatives available to the company,
the Board of Directors concluded that this combination is clearly
the best path to create value for our shareholders. An attractive,
certain cash dividend, together with participation in the future
success of the combined company, presents a compelling value
equation for Xerox shareholders. We are excited to strengthen our
longstanding relationship with Fujifilm as we enter the next phase
of Xerox’s transformation journey.”
Clear Leader in Innovative Print Technologies and Intelligent
Work Solutions
Xerox shareholders will have the opportunity to participate in
the new Fuji Xerox’s accelerated revenue trajectory and long-term
value creation potential. The transaction builds on the 56-year
collaborative history between Fujifilm and Xerox to create a global
leader in innovative print technologies and intelligent work
solutions with enhanced scale and innovation capabilities:
- Global leader with combined revenue
of approximately $18 billion and nearly $120 billion total
addressable opportunity.
- Enhanced scale with presence in
over 180 countries and covering key geographies including North
America, Japan, Europe, Asia Pacific and China.
- Combined leadership with a
strong track record of operational excellence, transformation
experience, customer relationships and industry expertise.
- Improved revenue profile and growth
trajectory by leveraging the combined expertise, competitive
strengths and geographic reach of the two companies.
- World-class innovation capabilities
to define the future of innovative print technologies and
intelligent work solutions by bringing together two R&D and
innovation leaders, along with Fujifilm’s extensive expertise. The
new Fuji Xerox will be well-positioned to lead in growing areas
such as high-speed inkjet, packaging, industrial print and
workplace automation, as well as future development opportunities
in artificial intelligence, machine learning, internet of things
and augmented reality.
- Strengthened balance sheet and cash
flow generation to provide flexibility to support strategic
investments in growth and enable increasing capital
returns.
Significant Value Creation Opportunity
This highly synergistic combination is expected to deliver at
least $1.7 billion in total annual cost savings by 2022, with
approximately $1.2 billion of the total cost savings expected to be
achieved by 2020. The targeted cost savings represent approximately
10% of the total cost base of the new Fuji Xerox and will drive
significant margin expansion over the next four years.
Of the total $1.7 billion cost savings, $1.25 billion is related
to the synergies that will be achieved through the transaction. In
addition, the combined company will benefit from a cost reduction
program commencing immediately at the existing Fuji Xerox joint
venture, which is targeted to generate approximately $450 million
of cost savings on an annualized basis. These amounts are
incremental to Xerox’s ongoing Strategic Transformation
initiatives. The new company expects to incur approximately $1.4
billion in one-time integration and restructuring costs, mainly in
the first three years.
The new Fuji Xerox will also have significant revenue synergy
opportunities over time as it capitalizes on its global reach,
industry-leading scale and enhanced innovation capabilities.
Importantly, the combined company will have an increased total
addressable opportunity estimated at nearly $120 billion and a
strong presence in attractive growth markets, allowing the new
company to become more competitive and better able to serve
customers and business partners globally.
Balance Sheet and Capital Allocation
The new Fuji Xerox expects to maintain investment grade credit
ratings at closing. The new company will maintain Xerox’s current
$1.00 annual dividend per share and commitment to return at least
50 percent of free cash flow to shareholders. The enhanced
financial flexibility of the combined company is expected to allow
for greater capital deployment toward targeted growth initiatives,
share repurchases and increased dividends over time.
Leadership and Governance
Upon close of the transaction, Jeff Jacobson will serve as chief
executive officer of the new Fuji Xerox.
The combined company’s Board of Directors will include 12
members, seven of whom will be appointed by the Fujifilm Board.
Five independent directors will be appointed from the Xerox Board.
Shigetaka Komori will serve as chairman of the board.
Financing Commitments
Financing commitments of $2.5 billion have been provided by
Citigroup Global Markets Inc. and Morgan Stanley Senior Funding,
Inc.
Path to Completion
The transaction, which is expected to close in the second half
of calendar year 2018, is subject to the satisfaction of customary
closing conditions and regulatory approvals and approval by Xerox
shareholders.
Advisors
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. and Morgan
Stanley & Co. LLC are serving as exclusive financial advisors
to Fujifilm, and Morrison & Foerster LLP is acting as legal
counsel. Centerview Partners LLC is serving as exclusive financial
advisor to Xerox and Paul, Weiss, Rifkind, Wharton & Garrison
LLP is acting as legal counsel.
Xerox Conference Call
Xerox will host a conference call today at 8:00 a.m. ET to
discuss this transaction. The webcast is available at
https://edge.media-server.com/m6/p/7ffthvi5 or
https://www.news.xerox.com/investors. A replay of the call will be
available at https://www.news.xerox.com/investors.
For More Information
Additional information regarding the transaction can be found on
www.thenewfujixerox.com.
About Fujifilm
FUJIFILM Holdings Corporation in Tokyo, Japan, brings continuous
innovation with leading-edge, proprietary technologies by
leveraging its photography expertise into a broad range of
industries globally, including healthcare, graphic systems, highly
functional materials, optical devices, digital imaging and document
products. These products are based on its extensive portfolio of
chemical, mechanical, optical, electronic and imaging technologies.
Fujifilm has operated in North America since 1965, with
approximately 6,000 employees currently in the U.S. and Canada. For
the year ended March 31, 2017, the company had global revenues of
$20.7 billion, at an exchange rate of 112 yen to the dollar.
Fujifilm is committed to responsible environmental stewardship and
good corporate citizenship. For more information, please visit:
www.fujifilmholdings.com.
About Xerox
Xerox Corporation is a technology leader that innovates the way
the world communicates, connects and works. We understand what’s at
the heart of sharing information – and all of the forms it can
take. We embrace the integration of paper and digital, the
increasing requirement for mobility, and the need for seamless
integration between work and personal worlds. Every day, our
innovative print technologies and intelligent work solutions help
people communicate and work better. Discover more at
www.xerox.com and follow us on Twitter at @Xerox.
About Fuji Xerox
Founded in 1962, Fuji Xerox Co., Ltd. is a leading company in
the Document Services & Communications field, offering
solutions and services to help customers resolve their business
challenges. Underlying our solutions and services are our
world-class office multifunction devices, printers and production
printers that we develop and manufacture for worldwide
distribution. Together with cloud and mobile solutions, Fuji Xerox
builds a communications environment that enable our customers to
access the right information, at the right time, and in the right
form—thereby contributing to their valuable communications. Fuji
Xerox is a 75-25 joint venture between FUJIFILM Holdings
Corporation and Xerox Corporation, and its direct sales force
covers Japan and the Asia-Pacific region including China. As a $10
billion enterprise, we employ approximately 47,350 people globally,
with more than 80 domestic and overseas affiliates / sales
subsidiaries. For more information, please visit
www.fujixerox.com.
Additional Information and Where to Find It
This release may be deemed to be solicitation material in
respect of the transactions with FUJIFILM Holdings Corporation
(“Fujifilm”) described herein (the “Transactions”) and/or the
matters to be considered at the Company’s 2018 Annual Meeting of
Shareholders. In connection with the Transactions and the 2018
Annual Meeting, Xerox plans to file with the Securities and
Exchange Commission (“SEC”) and furnish to Xerox’s shareholders one
or more proxy statements and other relevant documents. BEFORE
MAKING ANY VOTING DECISION, XEROX’S SHAREHOLDERS ARE URGED TO READ
THE PROXY STATEMENT(S) IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE
AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH
THE TRANSACTIONS AND/OR THE COMPANY’S 2018 ANNUAL MEETING OR
INCORPORATED BY REFERENCE IN THE PROXY STATEMENTS BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTIONS AND/OR THE
COMPANY’S 2018 ANNUAL MEETING AND THE PARTIES RELATED THERETO.
Xerox’s shareholders will be able to obtain a free copy of
documents filed with the SEC at the SEC’s website at
http://www.sec.gov. In addition, Xerox’s shareholders may obtain a
free copy of Xerox’s filings with the SEC from Xerox’s website at
http://www.xerox.com under the heading “Investor Relations” and
then under the heading “SEC Filings.”
Participants in the Solicitation
The directors, executive officers and certain other members of
management and employees of Xerox may be deemed “participants” in
the solicitation of proxies from shareholders of Xerox in favor of
the Transactions or in connection with the matters to be considered
at the Company’s 2018 Annual Meeting. Information regarding the
persons who may, under the rules of the SEC, be considered
participants in the solicitation of the shareholders of Xerox in
connection with the Transactions or the Company’s 2018 Annual
Meeting will be set forth in the applicable proxy statement and
other relevant documents to be filed with the SEC. You can find
information about Xerox’s executive officers and directors in
Xerox’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016, Xerox’s and such persons’ other filings with the
SEC and in Xerox’s definitive proxy statement filed with the SEC on
Schedule 14A.
Cautionary Statement Regarding Forward-Looking
Statements
This release, and other written or oral statements made from
time to time by management contain “forward-looking statements” as
defined in the Private Securities Litigation Reform Act of 1995.
The words “anticipate”, “believe”, “estimate”, “expect”, “intend”,
“will”, “should” and similar expressions, as they relate to us, are
intended to identify forward-looking statements. These statements
reflect management’s current beliefs, assumptions and expectations
and are subject to a number of factors that may cause actual
results to differ materially. Such factors include but are not
limited to: our ability to address our business challenges in order
to reverse revenue declines, reduce costs and increase productivity
so that we can invest in and grow our business; changes in economic
and political conditions, trade protection measures, licensing
requirements and tax laws in the United States and in the foreign
countries in which we do business; changes in foreign currency
exchange rates; our ability to successfully develop new products,
technologies and service offerings and to protect our intellectual
property rights; the risk that multi-year contracts with
governmental entities could be terminated prior to the end of the
contract term and that civil or criminal penalties and
administrative sanctions could be imposed on us if we fail to
comply with the terms of such contracts and applicable law; the
risk that partners, subcontractors and software vendors will not
perform in a timely, quality manner; actions of competitors and our
ability to promptly and effectively react to changing technologies
and customer expectations; our ability to obtain adequate pricing
for our products and services and to maintain and improve cost
efficiency of operations, including savings from restructuring
actions; the risk that individually identifiable information of
customers, clients and employees could be inadvertently disclosed
or disclosed as a result of a breach of our security systems;
reliance on third parties, including subcontractors, for
manufacturing of products and provision of services; our ability to
manage changes in the printing environment and expand equipment
placements; interest rates, cost of borrowing and access to credit
markets; funding requirements associated with our employee pension
and retiree health benefit plans; the risk that our operations and
products may not comply with applicable worldwide regulatory
requirements, particularly environmental regulations and directives
and anti-corruption laws; the outcome of litigation and regulatory
proceedings to which we may be a party; the risk that we do not
realize all of the expected strategic and financial benefits from
the separation and spin-off of our Business Process Outsourcing
business; the effects on our business resulting from actions of
activist shareholders; and other factors that are set forth in the
“Risk Factors” section, the “Legal Proceedings” section, the
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” section and other sections of our Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2017, June
30, 2017 and September 30, 2017 and our 2016 Annual Report on Form
10-K, as well as our Current Reports on Form 8-K filed with the
SEC. Furthermore, the actual results of the Transactions could vary
materially as a result of a number of factors, including, but not
limited to: (i) the risk that the transactions may not be completed
in a timely manner or at all, which may adversely affect Xerox’s
business and the price of Xerox’s common stock, (ii) the failure to
satisfy the conditions to the consummation of the transactions,
including the receipt of certain approvals from Xerox’s
shareholders and certain governmental and regulatory approvals,
(iii) the parties may be unable to achieve expected synergies and
operating efficiencies in the transactions within the expected time
frames or at all, (iv) the transactions may not result in the
accretion to Xerox’s earnings or other benefits, (v) the occurrence
of any event, change or other circumstance that could give rise to
the termination of the transaction agreements, (vi) the effect of
the announcement or pendency of the transactions on Xerox’s and/or
Fujifilm business relationships, operating results, and business
generally, risks related to the proposed transactions disrupting
Xerox’s current plans and operations and potential difficulties in
Xerox’s employee retention as a result of the transactions, (vii)
risks related to diverting management's attention from Xerox’s
ongoing business operations, (viii) the outcome of any legal
proceedings that may be instituted against Xerox, its officers or
directors related to the transaction agreements or the transactions
and (ix) the possibility that competing offers or acquisition
proposals for Xerox will be made. Xerox assumes no obligation to
update any forward-looking statements as a result of new
information or future events or developments, except as required by
law.
Fuji Xerox Co., Ltd. (“Fuji Xerox”) is a joint venture between
Xerox Corporation and Fujifilm in which Xerox holds a
noncontrolling 25% equity interest and Fujifilm holds the remaining
equity interest. In April 2017, Fujifilm formed an independent
investigation committee (“IIC”) to primarily conduct a review of
the appropriateness of the accounting practices at Fuji Xerox’s New
Zealand subsidiary and at other subsidiaries. The IIC completed its
review during the second quarter 2017 and identified aggregate
adjustments to Fuji Xerox’s financial statements of approximately
JPY 40 billion (approximately $360 million) primarily related to
misstatements at Fuji Xerox’s New Zealand and Australian
subsidiaries. We determined that our share of the total adjustments
identified as part of the investigation was approximately $90
million and impacted our fiscal years 2009 through 2017. We
concluded that we should revise our previously issued annual and
interim consolidated financial statements for 2014, 2015 and 2016
and the first quarter of 2017 the next time they are filed. Our
review of this matter has been completed. However, Fujifilm and
Fuji Xerox continue to review Fujifilm’s oversight and governance
of Fuji Xerox as well as Fuji Xerox’s oversight and governance over
its businesses in light of the findings of the IIC. At this time,
we can provide no assurances relative to the outcome of any
potential governmental investigations or any consequences thereof
that may happen as a result of this matter.
1 Based on diluted shares outstanding as of January 31, 2018,
assuming no conversion of preferred shares.
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FUJIFILM Holdings CorporationCorporate Communications
Office of Corporate Planning Division, +81 3 6271 2000orKekstRuth
Pachman, +1-212-521-4891ruth.pachman@kekst.comorKimberly Kriger,
+1-212-521-4862kimberly.kriger@kekst.comorXeroxMedia:Carl
Langsenkamp,
+1-585-423-5782carl.langsenkamp@xerox.comorInvestors:Jennifer
Horsley, +1-203-849-2656jennifer.horsley@xerox.com