Xerox CEO is back as board does shock U-turn

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Xerox Corp said its CEO and most of its board will step down to settle a suit by activist shareholders Carl Icahn and Darwin Deason, handing over to new management which will reconsider a contentious deal with Fujifilm Holdings. They had criticized the $6.1 billion deal to combine the US printer and copier maker into Fuji Xerox, an existing joint venture with the Japanese company.

The settlement agreement, which followed a rare court order to temporarily block the deal, expired at midnight GMT on Friday after the court was not able to act on the agreement.

Icahn and Deason confirmed the settlement pact with Xerox has expired and promised to continue the fight. In January it reached a deal to cede control of its operations to Fujifilm of Japan, which has always been its partner in an worldwide joint venture. According to Judge Ostrager, the facts "clearly show that Jacobson, having been told on November 10 that the [b] oard was actively seeking a new CEO to replace him, was hopelessly conflicted during his negotiation of a strategic acquisition transaction that would result in a combined entity of which he would be CEO".

Under the lapsed agreement, CEO Jeff Jacobson and six other current Xerox board members would have stepped down to allow representatives of Icahn and Deason to take control of the company.

The New York Supreme Court held a hearing on Thursday on an objection by Fujifilm to the agreement.

The Japanese company is satisfied the USA court has "accepted our view of the importance of an open, orderly and transparent review process before any final decisions are made", Fujifilm spokeswoman Mizuki Itou said in a statement yesterday.

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In a complex deal, Fuji Xerox would buy back Fujifilm's 75 percent stake in their joint venture before Fujifilm would then purchase 50.1 percent of new Xerox shares.

But Xerox instead turned the blame on Icahn and Deason.

The two companies agreed in late January to a US$6bn deal that would merge the USA printer and copier maker into Fuji Xerox, an existing joint venture between Xerox and Fujifilm, according to Reuters. He had also been a candidate under consideration by the old board to replace Jacobson as recently as a year ago, according to court documents.

The embattled office equipment company said late Thursday that a settlement it reached earlier this week with unhappy shareholders would not go into effect because a key deadline had been missed.

Fujifilm reiterated its call for the Xerox board to fulfill the deal agreement.

"I think they might be better off putting their energies into the medical business", he said.

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