Fujifilm Nears Deal With Xerox -- Update

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Xerox Corp. is nearing a deal with Japan's Fujifilm Holdings Corp. that would mark the end of the independence of the stalwart of 20th-century American industry.

The deal would combine Xerox with a joint venture the company has with Fujifilm, and the U.S. company's shareholders would own just under half of the resulting entity, according to people familiar with the matter. As part of the deal, to be announced as soon as Wednesday, Xerox shareholders would get an implied premium for their stock and some cash, one of the people said.

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Xerox shares would continue to trade following the transaction, should it be completed. As of Tuesday, Xerox had a market value of $8.3 billion.

The talks could still fall apart or the terms could change.

Earlier this month, The Wall Street Journal reported that Fujifilm and Xerox were discussing an array of possible alternatives that may or may not have included a change of control of Norwalk, Conn.-based Xerox.

The expected deal caps a yearslong decline at Xerox, which has been beset by a decrease in office printing and copying as more functions move online -- and more recently by a campaign by activist shareholders. It would put control of the company in the hands of a competitor that has successfully diversified away from printing and copying and another of its signature businesses, film photography.

Xerox has been under pressure from two of its biggest investors, who together own about 15% of the company and want it to make major changes including re-cutting the joint venture and to explore other potential deals. Carl Icahn, Xerox's biggest investor, and Darwin Deason, third-largest, joined together this month and called on Xerox to fire Chief Executive Jeff Jacobson and find a new owner. Mr. Icahn is seeking to change the board of directors, two years after he settled another fight with the company.

It isn't clear what impact the deal with Fujifilm might have on the activists' campaign.

Xerox was founded in 1906 in Rochester, N.Y., as a maker of photography paper. In 1947, it entered an agreement that gave it a license to develop a xerographic machine.

Xerox and Fujifilm struck the joint venture 55 years ago. It sells copiers and printers in the Asia-Pacific region. Three-quarters-owned by Fujifilm, it has about $10 billion in annual sales.

Xerox dominated the copier market for decades, but by the 1970s new competitors from Japan chipped away at its empire after U.S. antitrust regulators forced it to license its patent portfolio. The Fuji Xerox joint venture helped the company fend off Canon Inc. and other rivals with low-end copiers, but by the end of the '90s, the rise of email and desktop printers had upended its market and forced several painful restructurings.

Last year, Xerox broke itself in half, spinning its business-services operations into a new company dubbed Conduent Inc. The legacy company returned to its roots focusing on printers and copiers, an industry facing upheaval and an uncertain future.

Fujifilm, based in Tokyo, got its start in film and cameras and now derives most of its revenue from document services -- copiers -- and health care, including everything from in vitro diagnostic systems to pharmaceuticals and skin-care products. Its market value is about $22 billion.

Write to Dana Mattioli at dana.mattioli@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com and David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

January 30, 2018 20:21 ET (01:21 GMT)

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