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Business deals

Fujifilm concedes difficulties in pursuing Xerox acquisition

Chairman says companies see mutual benefit in maintaining current alliance

Fujifilm Chairman Shigetaka Komori says it will be tough to pull off the Xerox acquisition during an interview in Tokyo. (Photo by Toshiki Sasazu)

TOKYO -- Fujifilm Holdings' Chairman Shigetaka Komori has admitted that the acquisition of Xerox -- a deal announced in January then canceled by Xerox in May -- has become "difficult."

In an interview with Nikkei, Komori chose his words carefully but appeared to be on the verge of bowing to the inevitable.

He said he met Xerox CEO John Visentin in November and that the two "shared" the view that the companies can maintain their existing alliance, which also appeared to be on the rocks earlier this year.

In addition, Komori said Fujifilm will be able to put its mainstay copier business on the growth track even if Xerox does not reconsider its position.

Fujifilm in January said it had agreed to a deal in which the Japanese company would sell its stake in joint venture Fuji Xerox to Fuji Xerox itself and use the proceeds to acquire a 50.1% stake in Xerox. But the plan met with strong opposition from Xerox shareholders, including Carl Icahn, the U.S. company's largest shareholder.

A legal battle ensued, and Xerox was forced to back out of the deal.

"We haven't given up on acquiring Xerox," Komori told Nikkei, "but we will not take the initiative at this point. We are not going to try to persuade Xerox."

Fujifilm is demanding $1 billion in compensation from Xerox, saying that unilaterally calling off the agreed-upon deal is a breach of contract. "We are open to any proposals from Xerox," Komori said.

Fujifilm still has the option to renegotiate the terms of the acquisition with Xerox. At this point, however, that appears to be a nonstarter. "We have no intention of sweetening the financial terms of the January acquisition plan," said Komori, also Fujifilm's CEO. "A large majority of Fujifilm shareholders object to an additional contribution. We will not consider a new acquisition plan from our side."

After a U.S. appeals court gave Fujifilm a legal victory in October, Visentin traveled to Japan to open talks with Fujifilm. Those talks would lead to a face-to-face meeting between the U.S. executive and Komori, according to the Fujifilm chairman.

"Relations [between Fujifilm and Xerox] have been improving," Komori said. "As a result of the talks [with Visentin], I could gain the understanding [from him] that current relations are good."

Komori also expressed confidence that Fujifilm will be able to achieve growth by maintaining its existing alliance with Xerox, even if it cannot acquire the U.S. company.

Fujifilm is now restructuring Fuji Xerox, the core of its copier business. Fujifilm expects the reforms to lead to a 55 billion yen ($491 million) profit for the financial year through March 2020.

"The outlook is bright even if we can't acquire [Xerox]," Komori said.

The confrontation over the acquisition threatened to destroy the Fujifilm-Xerox alliance. But this worst-case scenario now appears avoidable.

As for the acquisition, Komori said it faces a bumpy road. "There are probably some Xerox shareholders who will not accept it without sweeter terms," he said. "It will be tough to convince them."

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