FUJIFILM Holdings Corporation (President: Kenji Sukeno, “Fujifilm”) announced today (January 31, 2018) that the company and Xerox Corporation (CEO: Jeff Jacobson, NYSE :XRX, “Xerox”) have entered into a definitive agreement to combine Fuji Xerox Co., Ltd. (President: Hiroshi Kurihara, “Fuji Xerox”) and Xerox. Fujifilm will own 50.1% stake of the combined company. This transaction has been unanimously approved by the Board of Directors of Fujifilm and Xerox on January 31st, and January 30th respectively.
The history of cooperation between Fuji Xerox and Xerox
Founded in 1962, Fuji Xerox is a leading Document Solution Company, and is currently a 75-25 joint venture between Fujifilm and Xerox. Fujifilm and Xerox have fostered an exceptional partnership through the existing Fuji Xerox joint venture for the past 56 years and have deepened their mutual cooperation in technology and other areas, building a relationship of trust. Fuji Xerox is known as one of the most successful cross-border joint ventures. This transaction is the optimal conclusion for both Fujifilm and Xerox, reached after evaluating various options to enhance the corporate value, and is expected to deliver significant synergies. Fuji Xerox operates mainly in Japan and the Asia Pacific, while Xerox focuses on the U.S. and European markets. Fuji Xerox and Xerox revolutionized office work with Xerography, and have been offering a wide range of products and services to support customers in communications and promoting value creation.
Overview of the combined company, and the expected synergies
The two companies will combine by Fuji Xerox becoming a 100% subsidiary of Xerox, and Xerox will change its name to “Fuji Xerox” (hereinafter “New Fuji Xerox”). Fujifilm will acquire 50.1% of New Fuji Xerox, and the company will maintain its NYSE listing. The combined company will maintain the “Fuji Xerox” and “Xerox” brands within its respective operating regions.
New Fuji Xerox will become a world-leading Document Solution Company by revenue. Under a globally unified management strategy, the combined company will further accelerate its business growth and offer new value to customers. New Fuji Xerox will benefit not only from its size but also from its solid management resources, including strong brands, state-of-the-art technologies and excellent human resources that support these brands, global marketing capabilities and excellent client base.
Moreover, by leveraging Fujifilm’s vast range of technologies, as well as its experience and knowhow in creating new businesses, New Fuji Xerox will accelerate its transformation, as a leading company not only in the office document business, which it has the No.1 position in, but also in commercial printing, centered around inkjet, as well as various types of industrial printing, and solution services that improve operational processes and productivity.
The combined company is expected to deliver a total of USD $1.7 billion in total annual cost savings by 2022, with approximately $1.2 billion of the total cost savings expected to be achieved by 2020. As part of this cost improvement initiatives, the existing Fuji Xerox will implement a fundamental structural reform, in order to improve earnings and productivity, and transform itself into a lean company.
Strategic direction of New Fuji Xerox
- Under a globally unified marketing strategy, offer excellent products and services in the office market, further accelerate market share in each region, and gain global accounts
- By optimizing the entire value chain, from R&D, manufacturing, procurement to logistics, realize timely launches of new products while improving cost competitiveness
- Through the combination of image processing technologies unique to Fujifilm, and document-related artificial intelligent technologies of new Fuji Xerox, automate operational processes that differ by sector and client, and provide solution services that further improve productivity
- The market domain of new Fuji Xerox will be expanded through a unique combination of Fujifilm’s state-of-the-art technologies in photography, inkjet, photolithography(*1), optical etc., and new Fuji Xerox’s document-related technologies, leading to innovative product development.
*1 Technology for creating minute patterns by applying photo-lithography technologies. Used in the manufacturing process of semiconductors, etc.
Governance of the new Fuji Xerox
- Board of Directors
- The new Fuji Xerox’s Board of Directors will include twelve members, seven of whom will be appointed by the Fujifilm Board. Five independent directors will be appointed from the Xerox Board. Shigetaka Komori, chairman and chief operating officer of Fujifilm and Chairman of the existing Fuji Xerox, is going to serve as chairman of the Board.
- In order to protect the interests of minority shareholders, a Conflict Committee which will evaluate and approve intra-Group transactions beforehand with independent directors as members will be set up.
- Business operation
- An organizational structure that can maximize the strengths of both Fuji Xerox and Xerox will be established.
- Personnel appointments will be made from the standpoint of maximizing the new Fuji Xerox’s strengths, rather than based on which group company the individual is from. Upon close of the transaction, Jeff Jacobson, current CEO of Xerox, will serve as chief executive officer of the new Fuji Xerox
Future growth strategies of Fujifilm
Fujifilm has built a powerful business platform in areas such as healthcare, highly functional materials, document and others, while undergoing a major shift in its business structure in its existing businesses such as photography and digital cameras, by responding promptly and adequately to sudden changes in the market environment, thus continuously growing its business. As a world-leading company in the document business, the new Fuji Xerox will accelerate value creation that lead to productivity improvements in the office-related business, by the combination with Fujifilm’s vast range of marking technologies from imaging to industrial applications, and utilization of Fujifilm’s management expertise and experience in business transformation, and improve its earnings capability. Fujifilm will continue its investments in growth areas such as healthcare and highly functional materials, further accelerating the growth of the overall Fujifilm Group. Following this transaction, consolidated sales of Fujifilm will far exceed 3 trillion yen.
Overview of the transaction
Fuji Xerox will buy back the 75% stake in Fuji Xerox from Fujifilm. Fujifilm will use the proceeds from selling the 75% stake to acquire 50.1% of the new shares of Xerox. There will be no cash outflow from Fujifilm. The new Fuji Xerox, which will become a consolidated subsidiary of Fujifilm, will maintain its NYSE listing (ticker code XRX). Both the headquarters of the current Xerox (Norwalk, Connecticut, U.S.A.) and the headquarters of the current Fuji Xerox (Minato, Tokyo, Japan) are to be used as headquarters of the new Fuji Xerox. The closing of this transaction is subject to certain conditions, including approval in Xerox’s shareholders’ meeting, as well as the completion of processes required by laws and regulations.
- 1. Overview of Fuji Xerox
Company name Fuji Xerox Co., Ltd. Established February 20, 1962 Headquarters Minato Ward, Tokyo Representative Hiroshi Kurihara, Director and CEO Sales JPY 1,089.6 trillion (fiscal year ended March 2017) Operating income JPY 76.7 billion (fiscal year ended March 2017) No. of employees 47,350 (as of the end of March 2017) Major regions of business Japan, China (including Hong Kong and Taiwan), South Korea, the Philippines, Vietnam, Cambodia, Myanmar, Thailand, Malaysia, Singapore, Indonesia, New Zealand, Australia, U.S.A.
- 2. Overview of Xerox Corporation
Company name Xerox Corporation Established April 18, 1906 Headquarters Connecticut U.S.A. Representative Jeff Jacobson, President & CEO Sales USD 10.771 billion (fiscal year ended Dec 2016) Operating income USD 568 million (fiscal year Dec 2016) No. of employees 37,600 (as of the end of December 2016) Major regions of business U.S.A., Canada, Brazil, France, Italy, Spain, U.K., Germany, Egypt, Nigeria, etc.
- 3. The impact on Fujifilm’s earnings
- The successful closing of this transaction is expected to have a mid-to-long term positive impact on Fujifilm’s consolidated earnings after the new Fuji Xerox becomes a consolidated subsidiary. There will be no impact from the combination to Fujifilm’s consolidated earnings in fiscal year 2017.
- 4. CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
- This press release contains “forward-looking statements” regarding the future, such as the outlook, targets, plans and strategies of Fujifilm and the new Fuji Xerox. These forward-looking statements are based on decisions and hypotheses that are based on information currently possessed by Fujifilm, Fuji Xerox and/or Xerox, and could differ materially from actual results or outcomes regarding Fujifilm and/or New Fuji Xerox in the future, due to uncertainties inherent in such decisions and hypotheses, as well as the possibility of changes to future business operations or changes in the situations in Japan or overseas, etc. These forward-looking statements may be identified by words such as ‘thinks’, ‘expects’, ‘anticipates’, ‘plans’, ‘intends’, ‘plans to’, ‘forecasts’, ‘future’, or similar expressions or by discussion of, among other things, strategy, goals, plans or intentions. Actual results may differ materially from those in the forward-looking statements in this press release, due to various reasons. Such reasons include, but are not limited to, (i) both parties not being able to reach a full agreement on the terms of this transaction, (ii) the approval by the Shareholders’ Meeting, needed for this transaction, not being obtained, (iii) risks of regulatory conditions or other conditions which have to be met in order for this transaction to close not being met, (iv) impact from changes in the legal structure, accounting standards etc. as well as changes in the business environment which impact the parties involved in this transaction, (v) issues in executing business strategies, (vi) impact from financial instability and/or changes in other general economic conditions and/or conditions in the industry, and (vii) other risks related to the closing of this transaction.
- Fuji Xerox and Xerox to combine to become a new Fuji Xerox