Fujifilm Holdings Corporation and Xerox Corporation have 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 R213 billion ($18 billion) and leadership positions in key geographic regions.
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, Connecticut, 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.
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 R29.6 billion ($2.5 billion) special cash dividend, or approximately R116.3 ($9.80) per share (1), 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 R360.26 ($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.
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.’
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, 'The 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.’
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 R213.9 billion ($18 billion) and nearly R1426 billion ($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.
- This highly synergistic combination is expected to deliver at least R20.2 billion ($1.7 billion) in total annual cost savings by 2022, with approximately R14.2 billion ($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.
- The new Fuji Xerox will also have significant revenue synergy opportunities over time as it capitalises on its global reach, industry-leading scale and enhanced innovation capabilities.
- The new Fuji Xerox expects to maintain investment grade credit ratings at closing. The new company will maintain Xerox’s current R11,89 ($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.
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.
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.
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.
1: Based on diluted shares outstanding as of January 31, 2018, assuming no conversion of preferred shares.