Xerox Corp. (NYSE:XRX) announced late Tuesday that its CEO Jeff Jacobson and most of its board will step down to settle a suit by activist shareholders Carl Icahn and Darwin Deason, who have been trying to kill a contentious deal with Fujifilm holdings Corp. (TYO: 4901).
Xerox shares were up 0.50% to US$32.45 in pre-market trading.
Under the agreement, Jacobson and six other current Xerox board members, including Chairman Robert Keegan, are stepping down to allow representatives of Icahn and Deason to take control of running Xerox.
The activist shareholders had pilloried the US$6.1bn deal to combine Xerox whose brand is synonymous with photocopying into Fuji Xerox, an existing joint venture with the Japanese company.
Reuters reported that Ichan and Deason had already won a rare court order to temporarily block the deal, which they said “undervalued Xerox.”
The Xerox board said on Tuesday that it decided to strike a deal with the activist investors after a US judge on Friday temporarily blocked the company's planned merger with Fujifilm. The New York judge agreed last week that Xerox CEO Jeff Jacobson had been "hopelessly conflicted" in negotiating a deal that would “put him in charge, since he knew the board was looking to replace him,” Reuters reported.
"We believe Friday's decision and this agreement mark a watershed moment for corporate governance generally and for Xerox specifically," Icahn said in a statement.
Media reports said Fujifilm, which saw its shares tumble 5.5% in Tokyo after news of the ouster, said it planned to file an objection with a court over the settlement.
In an intricate deal announced in January, the US company's operations would be merged with those of Fuji Xerox, a joint venture between the two firms. Fujifilm would then purchase 50.1% of Fuji Xerox, and ultimately take control of the US company.
The new board plans to meet "immediately" to consider "terminating or restructuring Xerox's relationship with Fujifilm and the proposed transaction with Fujifilm," according to the statement.
Keith Cozza, the CEO of Icahn Enterprises (NASDAQ:IEP), is set to become the new chairman of Xerox, according to the company statement.