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Fujifilm to Take Over Xerox for $6.1B, Creating New $18B Company

martinwolf Transaction Analysis
Financial Information*
  • Transaction Value                                       ~$6.1B
Transaction Facts
  • Fujifilm announced today it will take over Xerox (NYSE: XRX) for $6.1B using bank debt, purchasing a 50.1 percent stake in the existing joint venture Fuji Xerox.
  • Trading on the NYSE, the new $18B company (under the same name) will be headquartered in Norwalk, Connecticut and Tokyo. The company will operate as a subsidiary of Fujifilm.
  • As part of the deal, $2.5B will be returned to shareholders as a cash dividend. Fujifilm will cut 10,000 jobs in Asia as part of its own restructuring.
  • The deal is expected to close in the second half of 2018.
Scaling in Today’s Environment
  • Old and New: The longstanding joint venture agreement between the two companies, which accounts for nearly half of Fujifilm’s sales and operating profit, began in 1962. However, both companies have had mixed performances as the photocopy market has dwindled in the face of the paperless revolution. While Fujifilm reported a 3.4 percent increase in operating profit for the third quarter overall, the document solutions unit (which includes Fuji Xerox) experienced a 29.4 percent drop. 
  • Cost Savings: Xerox has been exploring different strategic options as it seeks to offset its losses; the company reported a net loss from continuing operations of $196M in the fourth quarter (there was a one-off $400M charge involving changes in domestic tax law, but the decline of the office printing market has been consistent). Ceding would help its balance sheet, according to both companies, as they expect at least $1.7B in total cost savings by 2022.
  • Mixed Reactions: While reactions to the deal have been mixed, as major Xerox investors Carl Icahn and Darwin Deason have disagreed with the company’s strategic direction, some partners believe the joint venture is necessary considering the large scale required to succeed. martinwolf president Marty Wolf told CRN in its article today that the deal positioned Xerox well for such a deal, following the Conduent spin-off that was completed earlier this month.
  • Nifty Fifty: The deal is notable considering the legacy and history of the company. Founded over a century ago in 1906 and listed publicly in 1961, Xerox became world-famous for its sales training program for thousands of non-Xerox employees. The company was once a one-decision stock to buy then hold, worth $160 a share and billions more at its zenith. Additionally, Xerox arguably initiated the PC movement with the Xerox Alto in 1973, where a screen, keyboard, mouse, and graphical interface came together for the first time. As the inventor of the graphical user interface (GUI) and other innovations that form the foundation of our current technological advancements, the company has also been one of the largest value destroyers in global business.
For more information about this transaction, click here to read the press release.
 
*Financial information from the press release. martinwolf was not the advisor in this transaction.
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