On Friday, a New York judge temporarily blocked a proposed merger between Xerox and Fujifilm. The ruling is seen as a victory for the activist investors who are trying to scuttle the merger deal.
Last month, a Xerox investor named Darwin Deason filed a lawsuit in opposition to the merger. He also requested to make his own nominations to the company’s board. Friday’s ruling reopened nominations to the board.
The judge’s decision comes only one day after the two companies had agreed to renegotiate the terms of their proposed $6.1 billion deal. They were forced to do this after Xerox investors balked at the terms of the deal, insisting on a higher share price.
The judge presiding over the case — Barry Ostrager, who sits on the New York Supreme Court for the County of New York — granted the injunction because he believes that Xerox CEO Jeff Jacobson agreed to the deal even after he was advised not to do it. Ostrager said in a statement that it was clear from the evidence presented in the case that on November 10 of last year Xerox’s board had informed Jacobson that they were intending to replace him as CEO, and that this brought him into a conflict of interest while negotiating a deal that would have made him CEO of the merged organization.
Opposing the merger is not only Deason but also legendary investor Carl Icahn. The two men are among the largest shareholders of Xerox and they believe that the proposed merger deal considerably undervalues the company.
In response to the court’s decision, Fujifilm says that it is considering all its options, which they say includes filing an appeal. The Japanese company issued a statement in which they said that they are not only disappointed by the court’s ruling but that they also disagree with it. They went on to say that Xerox shareholders should be able to decide the merits of the agreement for themselves.
Xerox said that it also disagrees with the court’s decision and that it would appeal it. It further echoed the sentiments of Fujifilm in that it believes that its shareholders should be able to decide for themselves whether the deal is good or not, and it added that joining forces with Fujifilm was the best way the company could build value for its shareholders.