The price looks reasonable, valuing the venture at about one year of sales. Fuji Xerox had revenue of 1 trillion yen ($9.2 billion) in the fiscal year through March. Printers and copiers are hardly a growth business as the world increasingly goes digital. Global printer shipments are expected to drop 2% annually in the five years through 2023, according to figures from Gartner Inc. Yet Fujifilm’s document solutions division (which houses Fuji Xerox) had an operating margin of 9.5% last year, higher than 9.4% for the healthcare and materials solutions unit that is the company’s main growth driver these days.
More importantly, the purchase is a clean solution that leaves Fujifilm free from distractions to concentrate on its business. The pursuit of Xerox plunged the company into a two-year morass. Activist investors Carl Icahn and Darwin Deason opposed the takeover, saying it undervalued Xerox. Lawsuits followed, Xerox’s CEO was pushed out, and the deal foundered. Fujifilm, which sued Xerox for $1 billion over the failed takeover, said Tuesday it will withdraw its lawsuits.
It’s open to debate whether the acquisition was the right strategic step for Fujifilm. Harder to defend is the company’s decision to stay in the battle once Icahn and Deason had prevailed and pushed Xerox to reject the approach. Pride more than cold business calculation may have had something to do with that. Fujifilm’s chief executive officer, Shigetaka Komori, hates losing and won’t give up easily, a person close to the company told the Financial Times in May 2018.
Tuesday’s reaction in Fujifilm shares probably owes as much to the curtailment of those entanglements as to the financial terms of the transaction. Full ownership of Fuji Xerox “will facilitate faster decision making in a rapidly changing business environment,” as Komori noted in the company’s statement. Copy that.
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Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.