Xerox Board of Directors Releases Letter to All Shareholders

NORWALK, Conn. —  May 8 – Xerox (NYSE: XRX) today issued the following letter from its Board of Directors to its shareholders.

To Our Fellow Shareholders,

As your representatives on the Xerox Board of Directors, we have consistently focused on two priorities:

  1. ensuring the success and stability of Xerox; and
  2. maximizing shareholder value.

We recognize that events over the last few weeks—including the unexpected, adverse lower court ruling on April 27 and our ongoing disagreement with Carl Icahn and Darwin Deason—have caused uncertainty, and that there is a great deal of misinformation in the marketplace.

The purpose of this letter is to set the record straight and discuss the actions your Board has taken, as well as the feedback we have heard from shareholders.

We stand at a strategic inflection point. Consistent with our duties to all Xerox shareholders, we intend to:

  • Resume discussions with Fujifilm regarding a potential combination with Fuji Xerox on superior terms to the transaction announced on January 31;
  • Continue to engage with all of our shareholders and ensure all shareholder voices are heard; and
  • Pursue our appeal of the lower court’s ruling in the Deason litigation, which we believe was wrongly decided and will be reversed.

We will take these steps while ensuring that Xerox continues to focus on driving operational and financial performance. As always, we will be guided by our commitment to ensure the success of Xerox and to maximize value for all shareholders.

Robust Strategic Review Process

In the fall of 2015, the Xerox Board began a strategic review of the company’s business portfolio and capital structure. This resulted in the company’s January 2016 announcement that it would spin off its business process outsourcing segment, later named Conduent. The Xerox Board pursued this transaction—with input from Mr. Icahn—because it was in the best interests of shareholders. The transaction generated significant shareholder value, with approximately $3.0 billion in market capitalization created to date across the two companies.

Throughout this period, the Xerox Board maintained a constructive dialogue with both Mr. Icahn and Mr. Deason. For example:

  • We reached a settlement with Mr. Icahn under which Mr. Icahn’s designee, Jonathan Christodoro, served as an observer on the search committee to identify new CEOs for both Conduent and Xerox. We subsequently agreed to add Mr. Icahn’s designee to the Xerox Board.
  • We amicably resolved litigation brought by Mr. Deason, allowing his preferred stock ownership to be split between Xerox and Conduent.

After the Conduent spin-off was completed, the Xerox Board, in consultation with a team of experienced legal and financial advisors, continued to evaluate ways of enhancing shareholder value, including:

  • Exploring strategic and financial options to enhance Xerox’s standalone trajectory; and
  • Engaging with multiple third parties to assess potential transactions.

The Fuji Xerox Combination

Following this strategic review, the Board decided to pursue what it believed was the most attractive option available, combining Xerox with Fuji Xerox. We remain convinced that a combination of these companies is the most value-enhancing opportunity for Xerox. The combination would, among other benefits:

  • Create a global leader in innovative print technologies and intelligent work solutions with $18 billion in revenue;
  • Deliver $1.7 billion in annual cost savings, including $1.25 billion in transaction synergies; and
  • Accelerate revenue growth through enhanced global reach, scale, innovation and customer value.

Since the announcement of the transaction, Xerox’s senior management team has had more than 100 meetings with investors, who clearly believe that:

  • There is a compelling strategic rationale for combining two longtime partners with synergistic, competitive strengths;
  • The Board should secure improved financial terms to obtain shareholder support; and
  • The recent financial performance and accounting issues at Fuji Xerox are important considerations in evaluating a potential combination.

Icahn/Deason Campaign

Mr. Icahn and Mr. Deason have every right to express their views about Xerox and its Board, and we are prepared to defend every decision we have made. We do not, however, believe that Mr. Icahn and Mr. Deason have the right to speak for all shareholders or deprive any shareholders of their right to be heard.

We have refrained from engaging in a back and forth with Mr. Icahn and Mr. Deason in their campaign against the company, even as they targeted management and the Board with personal, unsubstantiated attacks that we believe have been damaging to Xerox. However, after Mr. Icahn told the Nikkei Asian Review that a combination of Xerox and Fuji Xerox creates a risk of bankruptcy, we felt compelled to respond and to point out that Mr. Icahn’s fear-mongering was false and highly irresponsible. We do not wish to be drawn into a public dispute with Mr. Icahn and Mr. Deason, but will exercise our fiduciary duties at all times to protect the interests of all Xerox shareholders.

The Deason Litigation and April 27 Lower Court Ruling

As part of this campaign, Mr. Deason mounted an aggressive legal attack seeking to deprive Xerox shareholders of their right to vote on a transaction. On April 27, the lower court ruled in his favor.

We strongly disagree with Mr. Deason’s case and believe that the lower court’s unprecedented ruling disregarded well-settled law and will be overturned on appeal. In particular:

  • The Board, exercising its business judgment, and with the advice of its advisors, unanimously approved the Fujifilm transaction because it believed that it was the best option to maximize value for Xerox shareholders;
  • The Board’s decision was made after months of diligence and deliberation, including consideration of a number of potential alternative transactions; and
  • The Board was aware of the relevant facts, including our CEO’s authorized discussions with Fujifilm.

In granting a temporary injunction, rather than defer to the business judgment of the Xerox Board as New York law requires, the lower court substituted its own subjective judgment about the merits of, and process in approving, the transaction with Fujifilm. As a result, the lower court disregarded decades of settled legal precedent and denied Xerox shareholders the ability to decide for themselves whether the proposed transaction is in their own best interests.

The Settlement Agreement and Its Expiration

Why, then, did the Board decide to enter into the settlement agreement with Mr. Icahn and Mr. Deason?

We did so because we believed that the lower court’s decision prevented us from pursuing an enhanced deal with Fujifilm and effectively precluded us from securing maximized value for all shareholders.

Based on the information before us at the time, we determined that a settlement with Mr. Icahn and Mr. Deason represented our best option, as it would:

  • Remove significant uncertainty and business disruption that would result from protracted litigation and continued hostilities with Mr. Icahn and Mr. Deason;
  • Provide our shareholders, employees, customers and other stakeholders with clarity on a path forward and allow Xerox to stay focused on operating its business; and
  • Allow negotiations with Fujifilm to proceed to secure enhanced terms, unconstrained by the lower court’s ruling.

So, what changed?

In the days following the announcement of the settlement, which was conditioned on stipulations dismissing the litigation against Xerox, our shareholders spoke clearly and expressed their views about Xerox’s prospects under an Icahn/Deason regime. Xerox’s share price fell over 12 percent and, in our conversations with our long-term investors, it became obvious that a number of them were strongly averse to the settlement terms that we entered.

Then, at a hearing that concluded hours before expiration of the agreement, the lower court made clear that Xerox could, in fact, negotiate alternative transaction structures with Fujifilm.

That afternoon, Mr. Icahn and Mr. Deason contacted the Xerox Board’s representatives and stated they would let the settlement agreement expire and “go to war” unless Xerox terminated its proposed combination with Fuji Xerox immediately. The Board refused to be pressured into terminating the transaction agreement without careful deliberation and analysis.

Based on these developments, we concluded that it was in our shareholders’ best interests to allow the settlement to expire in accordance with its terms.

The Path Forward

We remain entirely focused on doing what is best for the company and all of its shareholders. To that end, we intend to continue to:

  • Focus on business stability and operational excellence. We will ensure that the company remains focused on driving its operational and financial performance. We announced last week that the company would have reaffirmed its full-year guidance in the normal course of business, absent recent events.
  • Drive shareholder value. We are continuing to explore options to maximize shareholder value, including securing an increase in consideration from Fujifilm.
  • Ensure shareholders’ voices are heard and reflected. We believe it is imperative that all shareholder voices are heard. The Board will reopen the window for nominating director candidate(s) at the 2018 Annual Meeting of Shareholders and is appealing the lower court’s decision, which improperly prevents shareholders from exercising their right to vote on the Fuji Xerox transaction.
  • Your Board remains fully committed to doing everything we can to maximize shareholder value and acting in the best interests of all Xerox shareholders.

We thank you for your support, and we commit to keeping all of our stakeholders informed of developments as we move forward.


Centerview Partners LLC and Citi are serving as financial advisors and Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal counsel to Xerox. Simpson, Thacher & Bartlett LLP is acting as legal counsel to the Xerox Board’s independent directors.

The Board of Directors of Xerox

Robert J. Keegan

Gregory Q. Brown

Joseph J. Echevarria

William Curt Hunter

Jeffrey Jacobson

Cheryl Gordon Krongard

Charles Prince

Ann N. Reese

Stephen H. Rusckowski

Sara Martinez Tucker

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