The announcement of a merger between Xerox. Corp and Fujifilm Holdings Corp.  leaves many questions unanswered, including the fate of more than 3,400 local workers.

The two companies said Wednesday that plan to merge Xerox with their longtime Fuji Xerox joint venture, with Fujifilm becoming sole owner of the iconic document services company.

The new company will be led by current Xerox CEO Jeff Jacobson and is expected to generate at least $1.7 billion in cost savings by 2022,  according to a news release announcing the merger.

“In many ways, Xerox and Fuji Xerox perfectly complement each other geographically and in our competitive strengths,” said Jacobson during a conference call Wednesday.

Fuji Xerox had $9.6 billion estimated revenue in 2017, serving markets in Japan and growing markets in China and the Asian Pacific area, he said. Forty percent of the company’s revenue comes from growing Graphic Communications and Solutions and Services divisions. 

Jacobson said consolidating the research and development and supply chain processes will improve competitiveness and should increase revenue. 

“The transaction creates a combined company that will be dramatically stronger and more competitive than either company is on a stand alone basis,” said Jacobson. 

Before the merger announcement, Fujifilm said it planned to cut 10,000 jobs at Fuji Xerox, the current joint venture, by 2020, citing increasingly severe market conditions. The companies are still acting as separate entities until the close of the merger transaction, so no local Xerox jobs will be immediately affected, said Xerox spokesman Carl Langsenkamp. 

This deal has been in the works for a while, and while nothing is certain at this point, it’s unrealistic to think those cuts won’t reach Rochester, said Brighton Securities chairman George Conboy. The existing joint venture employs about 47,000 people globally and Xerox employs about 36,000, with 3,400 in Monroe County.

Details: News release on Fuji Xerox deal

More: Xerox at a crossroads as top investors push for big changes

More: Xerox to leave downtown offices, relocate employees to Webster campus

Background: Xerox, Fujifilm closing in on deal

The boards of both Fujifilm and Xerox unanimously backed the deal, according to the release. The combined company will be called “Fuji Xerox” and have dual headquarters in Norwalk, Connecticut, and in Tokyo. It will use the Xerox brand in most nations and the Fuji Xerox brand in Asia and Australia.

According to the release, “Xerox shareholders will receive a $2.5 billion special cash dividend, or approximately $9.80 per share, funded from the combined company’s balance sheet, and own 49.9 percent of the combined company at closing.” Fujifilm will own a majority interest in the new Fuji Xerox and will provide “transformational leadership.”

The merger could bring short-term value for shareholders — Xerox stock was up slightly in the hours after the announcement — but at the end of the day, both companies are working in what has typically been a “difficult and perhaps stagnant marketplace” in recent years, said Conboy.

Greater Rochester Chamber of Commerce President and CEO Bob Duffy said his initial reaction to the news of the merger was concern, but after having conversations with a high ranking Xerox official, he is confident that this will be an overall positive change for the company and its Monroe County workforce.

“Xerox and Fuji have had an ongoing business relationship for many years. There is a sense with this merger that they will enhance their search delivery systems, their research and development, their innovation, their products,” said Duffy. “There appear to be no plans at this time for any changes with jobs…We can’t predict the future, but coming from people who are very forthright, there do not appear to be any concerns. We’re very committed to keeping the workforce here and growing. There is just a sense coming from Xerox that this is positive.  We are hoping for the best.”

He went on to call for the continued support of local companies.

“Rochester has a habit sometimes of lamenting if jobs get reduced, if companies go away. I would encourage people to support the hometown companies,” said Duffy. “Xerox puts forth a number of services and products. They’re a proud company. They were founded here. The founder’s daughter still resides here, so the connectivity to Rochester is a big one and one of the things that I would urge whenever possible, is to please support our hometown companies.”

Fujifilm and Xerox, which was founded in 1906, created a joint venture in the 1960s, called Fuji Xerox Co., a consolidated subsidiary of parent company Fujifilm Holdings Corp. Fuji Xerox spread to multiple countries in the Asia-Pacific area, developing office and printing equipment.

The announcement follows weeks of agitation over the direction of Xerox, led by two activist shareholders unhappy with the company’s performance. The shareholders, Carl Icahn and Darwin Deason, had previously opposed any expansion of the joint venture.

Icahn and Deason also nominated four individuals as candidates for the company’s board of directors, as the two expressed their unhappiness with Xerox’s current leadership. The 12-member board under the potential merger would include five independent directors appointed from Xerox’s board, and seven members appointed by Fujifilm. 

Jacobson said Wednesday that he’s not sure how Icahn and Deason, two of the company’s largest shareholders, will react to the merger news. 

Icahn, who hasn’t yet commented on the potential merger, may now sell his stock and walk away, said Conboy. The deal with Fujifilm is likely an olive branch to shareholders who were becoming increasingly anxious about the company’s future value generation,  he said. The transaction must be approved by shareholders. 

Earlier Wednesday, Xerox announced its fourth-quarter results, which included a loss from continuing operations and a $400 million charge related to the U.S. tax bill enacted last month.

Last week, Xerox announced plans to relocate all of its employees from Xerox Square in downtown Rochester to its Phillips Road campus in the town of Webster by the end of the year. That move will come after the company negotiated an early termination of its lease with Buckingham Properties.

Xerox is currently the building’s only tenant. The 30-story tower opened in 1967 and at 443 feet remains the tallest building in Rochester. The company said there would be no layoffs related to the move. 

Xerox sold the building to Buckingham Properties in 2013 for $40 million. The company then leased back several floors of office space after the sale. The lease was set to run through 2021.

The company’s 450-acre Xerox campus at 800 Phillips Road in Webster has a total assessed value of $47.2 million and in the most recent taxing years, the company paid $816,039 in town and county tax and $1.16 million to the Webster Central School District.

That represents about 1.5 percent of the total town tax levy, and about 1.2 percent of the total amount raised through tax by the school district.

Xerox was founded in Rochester in 1906 as The Haloid Co. and made photographic paper and supplies. After licensing the xerography technology invented by Chester Carlson, the company developed the Xerox 914 plain-paper copier that revolutionized offices worldwide. The company, renamed Xerox in 1961, grew rapidly as it employed thousands in the Rochester area.

But competitors like Canon eroded Xerox’s dominance in the copier market, and the rise of personal computers and digital printers led to a long and steady decline in the company’s fortunes.

This is a breaking story. Check back for details.

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Includes reporting from staff reporters Meaghan McDermott and Lauren Peace.

 

Fuji Xerox fact sheet

 

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