TOKYO -- Fujifilm Holdings announced on Wednesday that it will take over its long term partner Xerox, creating a copier maker on the same scale as industry leader HP.
Under the deal, Xerox will fully acquire their co-owned subsidiary Fuji Xerox, Fujifilm will own 50.1% of Xerox, and the U.S. company will subsequently change its name to Fuji Xerox.
Shigetaka Komori, chairman and CEO of Fujifilm, will double as Xerox's chairman, while Jeff Jacobson is to remain as CEO at Xerox. Of the 12 board members, seven will be from Fujifilm and the remainder from Xerox. The U.S. company will maintain its listing on the New York Stock Exchange.
Currently, Tokyo-based Fuji Xerox, a printer and photocopier maker 75% owned by Fujifilm and 25% by Xerox, operates in the Asia-Pacific region, while the U.S.- based Xerox operates in Europe and North America. The merger will allow Fujifilm to expand its office machines business globally.
"Acquiring Xerox had been under consideration for some time at Fujifilm," Komori said at a press conference on Wednesday evening. According to Komori, "the biggest challenge had been how to pay for the American company," which is worth more than $8 billion as of Tuesday's trading close. However, under the announced deal, there will be no cash-out for Fujifilm, as it will make the purchase by utilizing the unrealized profit of its Fuji Xerox interest.
Jacobson, representing the current board of Xerox, said in a prerecorded video message that "this transaction advances the historic relationship between our two companies."
Fujifilm and Xerox have been partners for over a century. They established Fuji Xerox in 1962 as a 50-50 joint venture, with Fujifilm increasing its stake to 75% in 2001. The Japan-based photocopier company has grown, and now generates around half the Japanese parent's consolidated sales. Those revenues have helped Fujifilm branch out into areas such as health care as demand for its photographic film dwindled.
The partnership is widely viewed as one of the most successful examples of a U.S.-Japan joint venture.
However, the geographical demarcation increasingly proved a barrier to business expansion. That was especially the case as multinational corporations increasingly need to adopt common corporate-wide information systems across countries.
The combination will generate immediate returns in the form of cost saving, Fujifilm said.
As a first step, Fujifilm will lay off 10,000 employees worldwide, including in mainland China, at the co-owned subsidiary. The staff cuts, along with other restructuring measures, will allow Fuji Xerox to save about 50 billion yen ($455 billion) a year, while the synergy from the combination is estimated to boost revenue by $1.2 billion a year.
The deal comes as Fuji Xerox came under scrutiny last year after a panel of outside experts discovered improper accounting practices at two of its subsidiaries in New Zealand and Australia, dating back to 2010. Komori said that the trouble brought him and Jacobson into closer communication in the past year or so.
Xerox had also been under pressure from activist shareholder Carl Icahn, the company's largest shareholder, who demanded the U.S. company alter or end its joint venture with Fujifilm. Darwin Deason, another major investor in Xerox, also pushed for changes, arguing the company should explore alternatives, including a sale, and change its top management.
Both Fujifilm and Xerox said that the deal will win the support of shareholders.
"This transaction also offers substantial upside for shareholders of the combined company -- including current shareholders of Xerox and Fujifilm Holdings -- who will own shares in a more competitive company that has enhanced opportunities for long-term growth and margin expansion," Jacobson said.
Shares of Fujifilm slid 8.3% within a few minutes before the close on the Tokyo Stock Exchange on Wednesday. The takeover was announced after the market close.
A trader suspects that news of the reported deal may have automatically triggered sell orders through algorithmic trading. The TSE declined to comment on the movement of individual shares, but said that there was no report of an erroneous trade.
Xerox shares closed at $32.84 in New York on Tuesday.
Separately, Fujifilm revised up its earnings estimate for the fiscal year ending March, predicting a net profit of 140 billion yen, up 5.7% from a year before and a record high, against a previous forecast of 125 billion yen. The company will take one-time charges of 49 billion yen related to cost-cutting, but this will be offset mainly by disposing of part of its securities holdings.
Nikkei staff writer Shotaro Tani in Tokyo contributed to this story.