Xerox Reinforces Significant Benefits of Its Proposed Combination with Fuji Xerox

NORWALK, Conn., March 7, 2018 – The Board of Directors (the “Board”) of Xerox (NYSE: XRX) today issued the following letter to Xerox shareholders, reinforcing its belief in the significant benefits of the Company’s proposed combination with Fuji Xerox:


Dear Xerox Shareholders,

On January 31, 2018, Xerox announced its plans to combine with Fuji Xerox – the joint venture Xerox and Fujifilm established in Asia 56 years ago – to create a global leader in innovative print technologies and intelligent work solutions.

As a result of a comprehensive review of the Company’s strategic and financial alternatives, Xerox’s Board and management strongly believe that the combination with Fuji Xerox is the best path forward to create value for Xerox and its shareholders:

  • The combination creates significant immediate and long-term value for Xerox shareholders;
  • Xerox shareholders will be owners of a larger, stronger and more valuable company with enhanced prospects for growth and value creation;
  • Xerox and Fujifilm are already closely aligned, and both have demonstrated track records of success in transformation;
  • The agreement establishes strong governance and ownership safeguards for current Xerox shareholders; and

The existing Fuji Xerox joint venture has been integral to Xerox’s competitiveness for many years, and the combination will optimize the benefits of this partnership for our Company.

The Transaction Creates Significant Immediate and Long-Term Value for Xerox Shareholders

The Transaction provides Xerox shareholders with significant value both at closing, which is expected to occur in the second half of 2018, and over time. This includes a substantial cash dividend that will be paid to Xerox shareholders contingent upon consummation of the Transaction, as well as the upside of a significant investment in a larger, stronger and more competitive company.

Value Delivered to Xerox Shareholders at Closing

Our partner in the Fuji Xerox joint venture, Fujifilm, will own the other 50.1 percent of the combined company. Fujifilm will also consolidate the same share of the debt associated with the special dividend paid to Xerox shareholders at closing, but will not receive any portion of this payment.

The relative ownership of the combined company is favorable to current Xerox shareholders and implies an over 15 percent premium relative to Xerox’s unaffected stock price of $30.35, which was prior to media reports about a potential transaction on January 10, 20182.

In addition, Xerox and Fujifilm teams have already identified $1.25 billion in annual cost savings opportunities from combining the two companies, demonstrating the highly synergistic attributes of this Transaction.

As shown in the chart below, this compelling shareholder value equation represents an illustrative total value of approximately $45 per share for the combined company.

Total Illustrative Value Creation for Xerox Shareholders

Importantly, this does not reflect the value creation or multiple expansion opportunity over time that we believe should result from the combined company’s enhanced revenue profile, global reach, scale and competitiveness.

Shareholders Will Be Owners of a Larger, Stronger and More Valuable Company

The Transaction will create an industry leader with $18 billion in revenue that is better positioned to compete and capture growth opportunities in the marketplace by leveraging the global reach, scale, technology and innovation strengths of the two companies. With direct access to high-growth markets in Asia Pacific, Xerox will operate as a truly global platform for the first time in its history.

Beyond the $1.25 billion in cost synergies described above, we believe the combined company will have an improved revenue profile based on significantly strengthened manufacturing, distribution, innovation and R&D strategies, as well as improved cost competitiveness across global markets. This is expected to result in an at least $1.0 billion revenue expansion opportunity for the combined company. We believe the improved revenue trajectory will increase the valuation of the combined company, while enabling the vast majority of the cost savings to flow to the bottom line.

Specifically, the revenue and cost synergies identified through this combination include:

  • Developing a more complete and competitive product portfolio with enhanced offerings in areas where Xerox is currently underpenetrated, such as high-speed inkjet and low-end A3;
  • Streamlining global R&D, product rollout and marketing strategies to deliver best-in-class solutions with greater coordination, efficiency and improved time-to-market;
  • Leveraging Xerox and Fuji Xerox’s integrated delivery and servicing capabilities to improve our solutions architecture and expand client relationships globally;
  • Transforming small and midsized business (SMB) strategy by expanding our channel reach and increasing cost competitiveness through synergies;
  • Creating an integrated global manufacturing, distribution and R&D platform by applying best-in-class practices; and
  • Optimizing the global footprint of manufacturing, distribution and R&D centers, and eliminating duplicative costs at corporate and support functions.


In addition to the $1.25 billion of cost synergies related to these actions, there is a separate cost reduction program already underway at the existing Fuji Xerox joint venture, which is expected to deliver $450 million in annual cost savings over the next two years. This brings the total annual cost savings target for the combined company to over $1.7 billion to be completed by 2022, with approximately $1.2 billion achievable by 2020:

By capitalizing on these opportunities, the combined company is expected to return to revenue growth by 2020, faster than Xerox could achieve on its own, and deliver industry-leading operating margins in the high teens by 2022.

As a result, the combined company’s operating leverage is projected to drive free cash flow in excess of $2.0 billion. This will enable us to support investments in innovation, strategic growth initiatives and attractive capital returns over time.

As both Fujifilm and Xerox have previously communicated, the combined company will maintain a commitment to return at least 50 percent of free cash flow to shareholders – in line with Xerox’s current capital return policy. This future capital return policy is in addition to the $2.5 billion special dividend that will be paid to Xerox shareholders at closing.

While Xerox has been successfully executing its strategy to improve its revenue trajectory and expand margins, we believe the future value potential of the combined company, driven by the substantial revenue and cost synergy opportunities, exceeds what would be achieved as a standalone company.

The synergies from bringing together two highly complementary businesses will be a leap forward on our path to become the industry leader and enhance shareholder value.

The proxy statement we will file in due course will include additional disclosures regarding the financial profile of the combined company, which we believe will reinforce the compelling value of this Transaction.

Xerox and Fujifilm Are Already Closely Aligned, and Both Have Demonstrated Track Records of Success in Transformation

Our longstanding relationships with Fujifilm and Fuji Xerox provide this combination with greater execution certainty than most M&A transactions. The companies have a long history of working together and know each other well. The combined company will have an experienced leadership team, led by Xerox’s CEO Jeff Jacobson, entirely committed to realizing the full value potential of the new company.

As evidenced by the proven track record of decisive actions at both Xerox and Fujifilm, the combined company will also build on a strong legacy of significant recent transformations at both companies: