XRX Xerox Holdings Corporation

Xerox Corp.'s largest individual shareholder, billionaire Darwin Deason, has filed a lawsuit that seeks to block the copier and services giant from splitting itself into two public companies.

Mr. Deason filed the lawsuit Tuesday in a U.S. District Court in Dallas, claiming the company has violated an agreement it struck with him in 2009 before Xerox acquired his business, Affiliated Computer Services Inc., for about $6 billion in cash and stock.

Xerox in January announced plans to split the company in two by year-end. One would keep the Xerox name and house the traditional copier business. The other, called Conduent Inc., is the company's business services, which includes the ACS business.

Mr. Deason owned a 6.1% stake in Xerox, mostly in common shares, at the start of the year, according to FactSet. His suit claims Xerox would exchange $300 million worth of preferred shares Mr. Deason owns for a stake in the legacy business instead of in Conduent.

A Xerox spokesman said that the split was structured as a spinoff of the business-services unit, so Mr. Deason's preferred shares would stay with the original company. The spokesman said the lawsuit was "meritless" and the company is "continuing to move forward with our planned separation, which we expect to complete on schedule."

Xerox's biggest institutional investor is Carl Icahn's hedge fund, which held a nearly 10% stake as of June 30 and has supported the plan to break up the company.

Mr. Icahn wasn't available to comment.

"The reorganization as currently proposed will trap Mr. Deason's Series A Preferred investment position in the post-Reorganization Xerox—a low-growth document technology business that will have a considerably diminished outlook and credit profile—without any stake in the valuable BPO business at Conduent," the lawsuit claims.

Splitting Xerox would essentially unravel the company it became after acquiring ACS, a pioneer in the business of outsourcing back-office work like software development and tech support.

Xerox has been plowing ahead with its plans for separating the businesses and has already named CEOs to run each of the two companies. The decision wasn't subject to shareholder approval.

Mr. Deason, who founded ACS and ran it for 20 years, has been negotiating with Xerox over his investment for several weeks, according to the lawsuit, and on Oct. 1 he sent a letter to the board that he would seek to gain board seats at both companies after the split.

Xerox in June agreed to add one of Mr. Icahn's representatives to its board and has promised the activist investor three board seats at Conduent after the spinoff.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

October 13, 2016 17:05 ET (21:05 GMT)

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