Xerox Ends 57-year Partnership With Fujifilm

Xerox Ends 57-year Partnership With Fujifilm
November 6, 2019


Xerox Holdings Corporation (NYSE: XRX) has announced the sale of its 25% stake in Fuji Xerox to Fujifilm in a deal worth $2.30 billion, effectively terminating a 57-year partnership between the two office automation giants. A joint venture deal between the US brand and Fuji Xerox was dropped due to a lack of investor support. The divestment deal ensures that both companies will continue to move forward without any legal hiccups. The stock of Xerox closed Tuesday’s trading at $36.75, up $2.07 or 5.97% from prior close.

Norwalk, Connecticut-based Xerox, which was facing issues with declining demand for office printing hardware, had accepted a cumbersome $6 billion agreement (January 2018) that would have resulted in the merger of the US brand and fuji Xerox, with Fujifilm gaining total control. The merger deal represented almost half of Fujifilm’s revenue as Xerox no longer develops its own office copiers and depends mainly on Fuji Xerox.

However, the joint venture deal was dropped after activist investors Carl Icahn and Darwin Deason crushed the agreement between the two enterprises in May 2018. Following the failure of the deal, Fujifilm filed a case against Xerox, seeking damages.The legal tussle caused uncertainty for the two enterprises that were perceived to be intricately linked through the 57-year old collaboration.

Under the new agreement, Xerox will start buying copiers from Fuji Xerox, which will function as a Fujifilm’s wholly-owned subsidiary. Xerox will also divest its ownership in another minor partnership with Fuji Xerox to Fujifilm, leading to a withdrawal of the lawsuit.

Xerox states that it intends to utilize the money received in the deal to acquire suitable companies. The company also clarified that it would share a portion of the money with shareholders while clearing $550 million in debt due in December.

After the agreement with Fujifilm was canceled, Xerox took steps to simplify its operations under a holding-company framework that would permit it to decrease tax obligations, diversify and safeguard patents.

For Fujifilm, acquiring total control of the JV permits additional flexibility, merging its artificial intelligence, medical, and other pursuits with the document division of the venture.

For Fujifilm, taking full control of the JV allows more flexibility, combining its artificial intelligence, medical, and other businesses with the venture’s document business, as per Fujifilm Chief Executive Shigetaka Komori.

Fujifilm, which restructured Fuji Xerox after the Xerox agreement got halted, stated that it intends to boost the revenue of the document printer division by 30% to 1.30 trillion yen ($11.94 billion) in the year ending March 2025.

Speaking high of document division, Komori said: “Fuji Xerox was a solid business and we made it stronger.”

Komori pointed out that Fuji Xerox, under the new deal, will be able to offer copiers to other companies in the US and Europe. Komori said, “We can now expand our sales territory…and launch new products.”

Rating agency S&P Global hopes that the divestment agreement will cement the collaboration between Fuji Xerox and Fujifilm, while enhancing overall capability. S&P Global issued the following statement: “We expect the share acquisition to deepen integration between Fujifilm and Fuji Xerox and improve efficiency; expected maintenance of a cross-licensing agreement means any material impact on Fuji Xerox’s business is unlikely.”

The market is expected to maintain its bullish view of the stock in the short-term.

The historical price chart indicates that the stock has firmly broken the resistance at 31. The stochastic oscillator is also making new highs. As a result, we can anticipate the stock to remain bullish in the short-term.

xrx - technical analysis - 6th Nov 2019

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Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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