Xerox's Largest Individual Shareholder Sues to Block Split
October 13 2016 - 5:20PM
Dow Jones News
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)
Copyright (c) 2016 Dow Jones & Company, Inc.
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