A tumultuous week for Xerox has resulted in another surprising turn of events. Late Thursday night, Xerox released a statement saying that its current board and management team will stay in place, after a settlement agreement it had reached with two activist shareholders has expired.
Xerox had said on Tuesday that CEO Jeff Jacobson and several of its board members would step down to settle a lawsuit by Carl Icahn and Darwin Deason. They are two of the company’s largest shareholders and they objected to a proposed deal that would see Fuji acquiring Xerox, which they felt undervalued Xerox.
But in the Thursday night statement, Xerox said the settlement with Icahn and Deason would have taken effect if certain “stipulations” discontinuing legal action by Deason had been implemented, and the company says in the absence of those stipulations, the agreement has expired.
Xerox says that “its Board of Directors recognize the uncertainty caused by the developments of the past several days among the company’s investors and other stakeholders,” and the company says its board and management team remain focused on “driving continued improvement in financial and operational performance and will consider all options to create value for the company and its shareholders.”
Icahn and Deason released a statement saying that the Xerox board “intentionally” violated its fiduciary duties by pursuing “their own brazen self-interest.”
The two shareholders say the Xerox board demanded additional “unprecedented” protections from the court and they say over the next few months they intend to see that Jacobson and some of the board members are held personally liable for what the two activist stockholders feel are actions that are damaging the company.
The proposed merger with Fuji was already blocked, at least temporarily, by a judge after Deason filed a lawsuit, and it’s not clear yet whether that deal will go forward. Fuji had opposed the settlement announced this week, and has also said it is planning to appeal the judge’s ruling that blocked the merger deal.
At Brighton Securities, Chairman George Conboy says the management fight could result in some private equity firms expressing an interest in buying Xerox. But in any case, Conboy says this situation will likely rattle a lot of investors if it isn’t resolved soon.
“What investors like is stability, and the last thing you have at the top at Xerox is stability with two groups battling over who’s going to be in charge. Investors are going to want to know that someone’s in charge, someone has their hands on the wheel, and if it’s not firmly resolved before the shareholders meeting, you’ll have quite a circus.”
The date for the annual Xerox shareholders meeting has not been set yet.