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Xerox Has Killed Its Merger With Fujifilm and Carl Icahn Is ‘Extremely Pleased’

Xerox called off a $6.1 billion takeover by Fujifilm Holdings and parted ways with its chief executive officer, handing a major victory to activist investors Carl Icahn and Darwin Deason.

In an agreement with the two investors, which together own about 13% of Xerox (XRX), the U.S. office equipment supplier said CEO Jeff Jacobson will step down along with several other board members. John Visentin is expected to take over as CEO while Keith Cozza, the CEO of Icahn Enterprises, will become chairman.

Fujifilm (FUJIY) on Monday said it “disputes Xerox’s unilateral decision” and is “reviewing all of our available options, including bringing a legal action seeking damages.”

The settlement marks the end of a tumultuous fight between Xerox and Icahn over a transaction that would cede control of the once-iconic American innovator synonymous with office copy machines to a Japanese company. As part of a deal proposed in January, Xerox would first merge with a joint venture it operates with Fujifilm in Asia, and the Tokyo-based company would ultimately take over slightly more than 50% of the combined entity.

Icahn and Deason opposed the Fujifilm transaction from the start. Deason sued Xerox in February to block the proposal, accusing Jacobson of acting without authorization to strike a deal that preserved his job at shareholders’ expense. The lawsuit also claimed that the company’s board breached its fiduciary duties.

“Fujifilm will urge the Xerox board of directors to reconsider their decision,” the Tokyo-based company said Monday in an emailed statement.

Icahn’s Activism

Last week, Icahn and Deason repeated their calls for Xerox to scrap the transaction, fire Jacobson, hire a new CEO, and have the board resign. The pair said they would be willing to consider any offers for the company of $40 a share or more.

Icahn has increased his activism over the past few months as he focuses his energies back on shaking up corporate targets after spending part of last year advising U.S. President Donald Trump on his regulatory agenda. He announced two more nominees for SandRidge Energy’s (SD) board on Friday, signaling he’s not interested in a proposed settlement of his fight to take control of the oil and gas explorer. Icahn also reached a deal with Newell Brands (NWL) that would give the billionaire investor seats on the board and see the Crock-Pot maker accelerate its transformation plans.

Fujifilm shares rose 1.3% at 1:44 p.m. in Tokyo trading on Monday, giving the company a market value of $20.2 billion. Xerox closed 2.9% higher at $30.17 on Friday in the U.S. for a market capitalization of $7.7 billion.

“It’s not bad for Fujifilm that Xerox ended the deal,” Tomoichiro Kubota, a market analyst at Matsui Securities said by phone. “From the beginning, the market was not accepting the deal as a good one since they don’t see big growth potential in Xerox.”

Separately, Fujifilm said it’s acquiring the stakes it doesn’t already own in drugmaker and distributor Toyama Chemical from Taisho Pharmaceutical (TAISF). Toyama Chemical will be combined with its Fujifilm RI Pharma unit effective Oct. 1, Fujifilm said in a statement Monday. Nikkei earlier reported Fujifilm was expected to acquire the stake for as much as 70 billion yen ($640 million).

Audited Financials

In its statement late Sunday, Xerox cited Fujifilm’s failure to provide audited financials for the joint venture on time, among other issues, for the decision to terminate the merger agreement. Bloomberg earlier reported on the cancellation of the transaction.

Fujifilm had said last week it intended to resume discussions with Xerox on a potential combination on “superior terms,” but it hadn’t received a new proposal from the U.S. company. Fujifilm has also said it was appealing a U.S. court injunction blocking the takeover.

“We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm,” Icahn said. “With that behind us and new shareholder-focused leadership in place, today marks a new beginning for Xerox.”

Xerox said it believes that the transaction cannot reasonably be expected to be completed under the circumstances, particularly given the court injunction and that shareholders didn’t support it on current terms, as well as 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,” it said.