Xerox Holdings Corp (NYSE: XRX) will sell its 25% stake in Fuji Xerox, its partner firm with Fujifilm Holdings Corp (TYO: 4901) for $2.3 billion after investors had their say on the deal involving the two companies.
Xerox have struggled with falling demand across 2019, particularly in their office equipment department.
Xerox had agreed to $6 billion deal that would have merged the U.S. brand into Fuji Xerox and given Fujifilm status as the dominant partner.
Xerox decided to scrap the deal last year, after lobbying from two investors against the acquisition. Activists investors Carl Icahn and Darwin Deason spearheaded the opposition.
“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,” ratings agency S&P Global (NYSE: SPGI) said in a statement.
As part of the new deal, Xerox will continue procuring copiers from Fuji Xerox, which will operate as a wholly owned subsidiary of Fujifilm.
Xerox have said that they plan to use the funds to pursue further acquisitions adding that it also plans to return money to shareholders and pay down $550 million debt due in December.
“This transaction is an ideal next step for Fuji Xerox and Fujifilm that we believe serves our stakeholders well and reflects our commitment to create innovative products that contribute to society,” said Shigetaka Komori, chairman and chief executive of Fujifilm.
“Fuji Xerox has now become a lean and strong company after a series of reforms we started in 2018, and I am confident that with this initiative it will be even stronger.”
The Japanese giant has also agreed to sell off litigation after the sale was confirmed.
The transaction will have a “mid-to-long term positive impact” on earnings after Fuji Xerox becomes a 100% owned subsidiary, Fujifilm said. The deal to buy Xerox’s stake also includes 51% ownership in Xerox International Partners, an original equipment supplier in the U.S. and Europe, the companies said.
The deal, which is worth roughly $2.3 billion comes a little over a year after the US printer scrapped a $6 billion merger with Fujifilm.
Shares of Xerox have spiked 3.55% as a result of the company update trading at $34.67 per share.
