Xerox Terminates Transaction Agreement with Fujifilm and Enters into New Agreement with Carl Icahn and Darwin Deason
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Xerox Terminates Transaction Agreement to Combine with Fuji Xerox,
then Enters into Settlement Agreement with Icahn and Deason
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John Visentin to be Named Vice Chairman and Chief Executive Officer
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New Xerox Board to Convene Immediately to Discuss Strategic
Alternatives
Xerox
(NYSE: XRX) today announced that, at 5:00 p.m. ET on May 13, 2018, it
notified Fujifilm that the previously announced transaction agreement to
combine Xerox with Fuji Xerox is being terminated in accordance with its
terms due to, among other things, the failure by Fujifilm to deliver the
audited financials of Fuji Xerox by April 15, 2018 and the material
deviations reflected in the audited financials of Fuji Xerox, when
delivered, from the unaudited financial statements of Fuji Xerox and its
subsidiaries provided to Xerox prior to the date of the Subscription
Agreement and taking into account other circumstances limiting the
ability of the Company, Fujifilm and Fuji Xerox to consummate a
transaction.
Thereafter, Xerox entered into a new settlement agreement with Carl
Icahn and Darwin Deason. The settlement agreement resolves the pending
proxy contest in connection with the company’s 2018 Annual Meeting of
Shareholders and Mr. Deason’s litigation against Xerox and its
directors. It does not affect any claims of Mr. Deason or other Xerox
shareholders against Fujifilm for aiding and abetting.
Under the terms of the settlement agreement, the following occurred:
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Xerox appointed five new members to its Board of Directors: Jonathan
Christodoro, Keith Cozza, Nicholas Graziano, Scott Letier and John
Visentin.
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Gregory Brown, Joseph Echevarria, Cheryl Krongard and Sara Martinez
Tucker will continue to serve as members of the Xerox Board of
Directors.
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Robert J. Keegan, Charles Prince, Ann N. Reese, William Curt Hunter,
and Stephen H. Rusckowski each resigned from the Board of Directors of
Xerox.
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Jeff Jacobson resigned from his role as Chief Executive Officer and as
a member of the Board of Directors of Xerox.
Subsequent to joining the Xerox Board of Directors, Keith Cozza, the
Chief Executive Officer of Icahn Enterprises L.P., is expected to be
appointed as the new Chairman of the Board of Directors of Xerox, and
John Visentin is expected to be appointed as the Vice Chairman and new
Chief Executive Officer of Xerox.
As part of the agreement, Xerox and Carl Icahn will withdraw their
respective nominations of any other director candidates for election at
the 2018 Annual Meeting of Shareholders. Xerox will continue to waive
the advance notice bylaw to enable any Xerox shareholder to provide
notice of intent to nominate directors for election at the 2018 Annual
Meeting of Shareholders until June 13, 2018. The 2018 Annual Meeting of
Shareholders will be postponed to a later date.
The new Board of Directors plans to meet immediately and, among other
things, begin a process to evaluate all strategic alternatives to
maximize shareholder value.
The former Board of Directors of Xerox provided the following statement:
“Over the past several weeks, the Xerox Board has repeatedly
requested that Fujifilm immediately enter into negotiations on improved
terms for a proposed transaction. Despite our insistence, Fujifilm
provided no assurance that it will do so within an acceptable timeframe.
The Xerox Board believes that the transaction cannot reasonably be
expected to be completed under these circumstances, particularly given
the court’s injunction of the transaction and the lack of shareholder
support for the transaction on current terms, as well as the unresolved
accounting issues at Fuji Xerox.
The Board also considered the potential instability and business
disruption during a proxy contest. Absent a viable, timely transaction
with Fujifilm, the Xerox Board believes it is in the best interests of
the company and all of its shareholders to terminate the proposed
transaction and enter a new settlement agreement with Icahn and Deason.
Under the agreement, the Xerox Board will be reconstituted to determine
the best path forward to maximize value for Xerox shareholders.”
Carl Icahn provided the following statement:
“We are extremely pleased that Xerox finally terminated the
ill-advised scheme to cede control of the company to Fujifilm. With that
behind us and new shareholder-focused leadership in place, today marks a
new beginning for Xerox. We have often said that the most important
person at a company (by far) is the CEO. We are therefore also pleased
that John Visentin, a tried and true veteran in this area, will be
taking the helm.”
Darwin Deason provided the following statement:
“With the limiting Fujifilm agreement terminated, Xerox is now
positioned to conduct a true, robust strategic alternatives process.
John Visentin has spent weeks preparing himself to run the company and
speaking to numerous market participants regarding strategic
alternatives. Xerox is fortunate to have someone with his experience and
preparation to lead it through this exciting and transformative time.”
New Director Biographies
Giovanni (“John”) Visentin is expected to be the Vice Chairman
and Chief Executive Officer of Xerox Corporation. Prior to being
appointed to that role, Mr. Visentin was a Senior Advisor to the
Chairman of Exela Technologies and an Operating Partner for Advent
International, where he provided advice, analysis and assistance with
respect to operational and strategic business matters in the due
diligence and evaluation of investment opportunities. John was also a
consultant to Icahn Capital in connection with a proxy contest at Xerox
Corporation from March 2018 to May 2018. In October 2013, Mr. Visentin
was named Executive Chairman and Chief Executive Officer of Novitex
Enterprise Solutions following the acquisition of Pitney Bowes
Management Services by funds affiliated with Apollo Global Management.
In July 2017, Novitex closed on a business combination with SourceHOV,
LLC and Quinpario Acquisition Corp. 2 to form Exela Technologies,
becoming one of the largest global providers of transaction processing
and enterprise information management solutions. Exela Technologies now
trades on the NASDAQ under the ticker symbol XELA. Mr. Visentin was
previously an Advisor with Apollo Global Management and contributed to
their February 2015 acquisition of Presidio, the leading provider of
professional and managed services for advanced IT solutions, where he
was Chairman of the Board of Directors from February 2015 to November
2017. Mr. Visentin has managed multibillion dollar business units in the
IT services industry (at each of Hewlett-Packard and IBM) and over the
course of his career has a proven track record transforming complex
operations to consistently drive profitable growth. Mr. Visentin
graduated from Concordia University in Montreal, Canada, with a Bachelor
of Commerce.
Jonathan Christodoro is a private investor. Mr. Christodoro
served as a Managing Director of Icahn Capital LP, where he was
responsible for identifying, analyzing and monitoring investment
opportunities and portfolio companies, from July 2012 to February 2017.
Prior to joining Icahn Capital, Mr. Christodoro served in various
investment and research roles at P2 Capital Partners, LLC, Prentice
Capital Management, LP and S.A.C. Capital Advisors, LP. Mr. Christodoro
began his career as an investment banking analyst at Morgan Stanley,
where he focused on merger and acquisition transactions across a variety
of industries. Mr. Christodoro has been a director of: PayPal Holdings,
Inc., a technology platform company that enables digital and mobile
payments worldwide, since July 2015; Lyft, Inc., a mobile ride-sharing
application, since May 2015; Enzon Pharmaceuticals, Inc., a
biotechnology company, since October 2013 (and has been Chairman of the
Board of Enzon since November 2013); and Herbalife Ltd., a nutrition
company, since April 2013. Mr. Christodoro was previously a director of:
Xerox, from June 2016 to December 2017; Cheniere Energy, Inc., a
developer of natural gas liquefaction and export facilities and related
pipelines, from August 2015 to August 2017; American Railcar Industries,
Inc., a railcar manufacturing company, from June 2015 to February 2017;
Hologic, Inc., a supplier of diagnostic, medical imaging and surgical
products, from December 2013 to March 2016; eBay Inc., a global commerce
and payments company, from March 2015 to July 2015; and Talisman Energy
Inc., an independent oil and gas exploration and production company,
from December 2013 to May 2015. American Railcar Industries is
indirectly controlled by Carl C. Icahn. Mr. Icahn has or previously had
non-controlling interests in each of Xerox, PayPal, eBay, Lyft,
Cheniere, Hologic, Talisman, Enzon and Herbalife through the ownership
of securities. Mr. Christodoro received an M.B.A. from the University of
Pennsylvania's Wharton School of Business with Distinction, majoring in
Finance and Entrepreneurial Management. Mr. Christodoro received a B.S.
in Applied Economics and Management Magna Cum Laude with Honors
Distinction in Research from Cornell University. Mr. Christodoro also
served in the United States Marine Corps.
Keith Cozza has been the President and Chief Executive Officer of
Icahn Enterprises L.P., a diversified holding company engaged in a
variety of businesses, including investment, automotive, energy, gaming,
railcar, food packaging, metals, mining, real estate and home fashion,
since February 2014. In addition, Mr. Cozza has served as Chief
Operating Officer of Icahn Capital LP, the subsidiary of Icahn
Enterprises through which Carl C. Icahn manages investment funds, since
February 2013. From February 2013 to February 2014, Mr. Cozza served as
Executive Vice President of Icahn Enterprises. Mr. Cozza is also the
Chief Financial Officer of Icahn Associates Holding LLC, a position he
has held since 2006. Mr. Cozza has been a director of: Tropicana
Entertainment Inc., a company that is primarily engaged in the business
of owning and operating casinos and resorts, since February 2014; and
Icahn Enterprises L.P., since September 2012. In addition, Mr. Cozza
serves as a director of certain wholly-owned subsidiaries of Icahn
Enterprises L.P., including: Federal-Mogul Holdings LLC (formerly known
as Federal-Mogul Holdings Corporation), a supplier of automotive
powertrain and safety components; Icahn Automotive Group LLC, an
automotive parts installer, retailer and distributor; and PSC Metals
Inc., a metal recycling company. Mr. Cozza was previously: a director of
Herbalife Ltd., a nutrition company, from April 2013 to April 2018; a
member of the Executive Committee of American Railcar Leasing LLC, a
lessor and seller of specialized railroad tank and covered hopper
railcars, from June 2014 to June 2017; a director of FCX Oil & Gas Inc.,
a wholly-owned subsidiary of Freeport-McMoRan Inc., from October 2015 to
April 2016; a director of CVR Refining, LP, an independent downstream
energy limited partnership, from January 2013 to February 2014; and a
director of MGM Holdings Inc., an entertainment company focused on the
production and distribution of film and television content, from April
2012 to August 2012. Federal-Mogul, Icahn Automotive, CVR Refining,
Icahn Enterprises, PSC Metals, and Tropicana are each indirectly
controlled by Carl C. Icahn, and American Railcar Leasing was previously
indirectly controlled by Mr. Icahn. Mr. Icahn also has or previously had
non− controlling interests in Freeport-McMoRan, Herbalife and MGM
Holdings through the ownership of securities. Mr. Cozza holds a B.S. in
Accounting from the University of Dayton.
Nicholas Graziano has served as Portfolio Manager of Icahn
Capital, the entity through which Carl C. Icahn manages investment
funds, since February 2018. Mr. Graziano was previously the Founding
Partner and Chief Investment Officer of the hedge fund Venetus Partners
LP, where he was responsible for portfolio and risk management, along
with day-to-day firm management, from June 2015 to August 2017. Prior to
founding Venetus, Mr. Graziano was a Partner and Senior Managing
Director at the hedge fund Corvex Management LP from December 2010 to
March 2015. At Corvex, Mr. Graziano played a key role in investment
management and analysis, hiring and training of analysts and risk
management. Prior to Corvex, Mr. Graziano was a Portfolio Manager at the
hedge fund Omega Advisors, Inc., where he managed a proprietary equity
portfolio and made investment recommendations, from September 2009 until
December 2010. Before Omega, Mr. Graziano served as a Managing Director
and Head of Special Situations Equity at the hedge fund Sandell Asset
Management, where he helped build and lead the special situations team
responsible for managing a portfolio of concentrated equity and activist
investments, from July 2006 to July 2009. Mr. Graziano has served on the
Board of Directors of Herbalife Ltd., a nutrition company, since April
2018. Mr. Graziano previously served on the Board of Directors of each
of: Fair Isaac Corporation (FICO) from February 2008 to May 2013; WCI
Communities Inc. from August 2007 to August 2009; and InfoSpace Inc.
from May 2007 to October 2008. Carl C. Icahn has non-controlling
interests in Herbalife through the ownership of securities. Sandell
Asset Management had non−controlling interests in FICO and InfoSpace
through the ownership of securities. Mr. Graziano completed a five-year
undergraduate/MBA program at Duke University earning a BA in Economics
and an MBA from The Fuqua School of Business.
A. Scott Letier has been Managing Director of Deason Capital
Services, LLC, (“DCS”) the family office for Darwin Deason, since July
2014. Prior to joining DCS, Mr. Letier was the Managing Director of JFO
Group, LLC, the family office for the Jensen family from September 2006
to July 2014. Mr. Letier has over 20 years of prior leadership roles
serving as a private equity investment professional and chief financial
officer, and began his career in the audit group at Ernst & Whinney (Now
Ernst & Young). Mr. Letier has served on numerous boards in the past,
and currently serves on the Board of Directors for various private
companies, including Stellar Global, LLC, an Australian and US based
BPO/CRM Call Center Company, Colvin Resources Group, a Dallas based
search and staffing firm, Grow 52, LLC (dba, Gardenuity), a tech enabled
retailer, and serves on the fund advisory board of Griffis Residential,
a Denver based multi-family real estate management and investment firm.
Mr. Letier also serves as Treasurer, board member, executive committee
member, and is Chairman of the audit and finance committees of the
Dallas County Community College District Foundation. Mr. Letier is a
Certified Public Accountant and has a BBA with a concentration in
accounting from the Southern Methodist University – Cox School of
Business.
Cautionary Statement Regarding Forward-Looking Statements
This
communication, 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; the results of any process to evaluate
strategic alternatives; 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 2017 Annual Report on
Form 10-K, as well as our Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed with the SEC.
Fuji Xerox Co., Ltd. (“Fuji Xerox”) is a joint venture between Xerox 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 (the “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 revised our
previously issued annual and interim consolidated financial statements
for 2014, 2015 and 2016 and the first quarter of 2017. 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.
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.
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