Fujifilm Chairman Asserts Xerox CEO Fails to Understand Value of 50-year Partnership

TOKYO, June 27, 2018 /PRNewswire/ -- FUJIFILM HOLDINGS (TSE: 4901) today sent a letter from Chairman Shigetaka Komori to Xerox (NYSE: XRX) CEO John Visentin, in response to the letter Mr. Visentin sent to him dated June 25, 2018.

In the letter, Mr. Komori highlights the following:

• It is obvious to objective observers that Xerox's stated reasons for terminating the transaction with Fujifilm are merely a thinly veiled pretext to bargain for a higher price from Fujifilm at the behest of two minority shareholders of Xerox. 
• It was Xerox that first approached Fujifilm with the proposed transaction. Fujifilm entered into discussions because it believed the transaction could be beneficial specifically for Xerox shareholders. 
• Xerox's common stock closed at $34.13 per share after the announcement of the transaction on January 31, 2018; yesterday, it closed at $25.33 per share, a decline of more than 25%. The market appears to understand that the agreed-upon transaction was substantially superior to the status quo for Xerox shareholders.
• Fujifilm continues to maintain that Xerox should take all steps to allow its shareholders to decide for themselves whether to approve the transaction with Fuji Xerox.
• Fuji Xerox's past accounting issues have been properly resolved and there is no reason to assert that these issues continue to exist. Audits have been completed by two top-tier auditing firms, for all of Fuji Xerox's operating companies in its territory, including China.
• If Xerox does not renew the Technology Agreement in 2021, Fujifilm is prepared to respond by competing with Xerox in Asia Pacific, and by marketing in territories where Xerox is currently doing business unchallenged by Fujifilm, such as America and Europe.

Following is the text of the letter in its entirety:

June 27, 2018

Mr. John Visentin
Vice Chairman and
Chief Executive Officer
Xerox Corporation
45 Glover Avenue
Norwalk, Connecticut 05856 USA

Dear Mr. Visentin,

I write in response to your letter dated June 25, 2018.

First of all, although Xerox seems to justify its termination of the Share Subscription Agreement with the reason that Fujifilm committed material breach, we will clearly argue that we did not commit such at all and your termination of the agreement lacked legitimate reason.

Our agreements to combine Xerox and Fuji Xerox were fairly negotiated at arms' length by sophisticated parties and were unanimously approved by the boards of directors of both Xerox and Fujifilm. Although you desperately attempt to justify your unilateral termination of these agreements in your letter, we are confident that the court will see through your misleading misstatements and conclude what is obvious to objective observers:  that your stated reasons for terminating our deal are merely a thinly veiled pretext to bargain for a higher price from Fujifilm at the behest of two minority shareholders.

In addition, your misleading reference to "surreptitious" conduct by Fujifilm seeks to whitewash that it was the conduct of your former CEO and directors that caused the New York Supreme Court to enjoin, preliminarily, the transaction.

It was Xerox that first approached us with the proposed transaction.  We entered into discussions with Xerox since we believed the transaction could be beneficial for the shareholders of both companies, but specifically for yours given the shrinkage of market and low market shares of Xerox in your territories.  Indeed, the financial impact of Xerox's unjustified purported termination of the transaction appears to have been significant for Xerox shareholders:  following the announcement of the transaction on January 31, 2018, Xerox's common stock closed at $34.13 per share; yesterday, it closed at $25.33 per share, a decline of more than 25%.  The market appears to understand that our agreed-upon transaction was substantially superior to the status quo for Xerox shareholders. We continue to maintain that Xerox should take all steps to allow its shareholders to decide for themselves whether to approve the transaction with Fuji Xerox.

I do not intend to dignify every misstatement in your letter with a response, but I am afraid I have no choice but to address your outrageous mischaracterizations of the past accounting issues at Fuji Xerox.  As you very well know, Fuji Xerox has devoted extensive resources to ensure that past accounting issues have been properly resolved and there is no reason to assert that these issues continue to exist.  Audits have been completed by two top-tier auditing firms, for all of Fuji Xerox's operating companies in its territory, including China.  In addition, while you criticize Fujifilm as a shareholder of Fuji Xerox for its questionable accounting issue, you should note that Xerox is another shareholder of Fuji Xerox and it is obvious mistake to accuse only one party of the joint venture for the accounting issue.

As for your stated intent to not renew the Technology Agreement in 2021 and conduct business in the Asia Pacific market, we are prepared to respond by competing with Xerox here in Asia Pacific, and by marketing in territory where Xerox is currently doing business unchallenged by us, such as America and Europe.  While Xerox presently has no marketing facilities here in Asia Pacific, we have global infrastructure that we can utilize for marketing worldwide.   Accordingly, we believe it would be enormously costly and difficult for Xerox to gain business in Asia Pacific.

Lastly, I need to point out that you did not attend Fuji Xerox's annual shareholders' meeting and board meeting on June 20, in spite of the fact that you were to be elected as a new director of the board of Fuji Xerox at the meeting. Your letter was sent without any prior communication from you and was actually publicized before it even reached me.  This is impolite and wrong, and I hope our communications will be in a more respectful manner going forward.

Best Regards,

Shigetaka Komori 
Chairman and Chief Executive Officer
FUJIFILM Holdings Corporation

About Fujifilm

FUJIFILM Holdings Corporation, Tokyo, Japan, brings innovative solutions to a broad range of global industries by leveraging its depth of knowledge and fundamental technologies derived from photographic film. Its proprietary core technologies contribute to the fields of healthcare, graphic systems, highly functional materials, optical devices, digital imaging and document products. These products and services are based on its extensive portfolio of chemical, mechanical, optical, electronic and imaging technologies. For the year ended March 31, 2018, the company had global revenues of $23.0 billion, at an exchange rate of 106 yen to the dollar. Fujifilm is committed to responsible environmental stewardship and good corporate citizenship. For more information, please visit: www.fujifilmholdings.com.  

Contacts

FUJIFILM Holdings Corporation

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Kimberly Kriger, +1-212-521-4862
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SOURCE FUJIFILM Holdings Corporation

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