Monday, March 5, 2018

What You Should Expect From the Xerox and Fuji Merger

In late January 2018, Xerox and Fuji Xerox announced that the two companies would merge.
The move for Fujifilm Holdings to consolidate its stake in Xerox in the landmark $6.1 billion
deal comes as both companies seek to leverage their respective strengths and offer
customers better, more powerful office solutions and graphic communications equipment.

The History of Xerox and Fuji Xerox

At first, it might seem odd that Xerox and Fuji Xerox would merge, since both companies
already share the Xerox name.
But Fuji Xerox is the result of a 1962 partnership between Fujifilm Holdings and Rank Xerox,
which was absorbed into Xerox Corporation in 1997. Fujifilm Holdings has a 75 percent
stake in the joint venture and Xerox 25 percent.
This deal would see Fuji Xerox buying back its stake from FujiFilm Holdings for
$6.1 billion dollars' worth of bank debt and using the proceeds to purchase 50.1 percent of
new Xerox shares, making it the majority stakeholder of the tech innovation giant.
This decision produces a $2.5 billion special cash dividend for corporate stakeholders and
gives the combined company a better edge developing new technologies. It gives Xerox,
an iconic technology brand with a deeply-entrenched culture of innovation and one of the
best operating margins in the industry access to Fuji Xerox's top-rated Asian market share
and world-class research and development platform.
According to Fujifilm CEO Shigetaka Komori: “The new structure will leverage the strengths
of [Fujifilm Holdings, Fuji Xerox, and Xerox Corporation]”
These strengths include Xerox's strong governance standards and capacity for innovation.
FujiFilm Holdings has growth capacity that Xerox would otherwise not have access to,
particularly in the Asian market – it is Japan's number-one print industry brand.

By the Numbers: The New Combined Fuji Xerox

The broad global scale of Fuji Xerox following the execution of the merger will encompass
more than 180 countries. The new company will enjoy number-one ranking in equipment
revenue share for the print industry, and a new addressable opportunity of approximately
$120 billion dollars. This will lead to projected revenues of $18 billion dollars.
The combined company will have an estimated $1 billion dollars invested in R&D, making it
the industry's largest innovator by market share. Both companies will merge their six
combined innovation labs, redirecting the focus of their 6,600+ engineers towards new
methods for generating value for 21st century organizations.
Fuji Xerox will now have 11,470 patents to its name, and a strong financial profile boosted
by approximately $1.7 billion in expected annual cost savings. It will achieve an industry-
leading operating margin in the high-teens by 2022, and enjoy a free cash flow of $1.5
billion dollars by 2020.

What to Expect from the Future Fuji Xerox

Xerox CEO Jeff Jacobson announced that the merger unlocks significant opportunities for
growth and productivity while delivering significant value to Xerox shareholders. The $2.5
billion special cash dividend amounts to a per-share bonus of $9.80. The new company will
be better positioned to operate in fast-growing markets, and better capable of creating
innovative products for the office environments of the future.
Xerox is now poised to take advantage of a leadership position in the growing Asia-Pacific
market, worth $36 billion. The company's multi-brand reseller expansion strategies have
not traditionally been a part of Fuji Xerox's operational approach, creating an exciting
avenue for future growth.
Everyday Xerox customers can expect advances in high-speed inkjet technology, packaging,
workplace automation, and industrial print thanks to the addition of Fuji Xerox expertise
and development resources. In particular, the new company's AI initiatives stand to gain
significant traction from the synergistic combination of expertise between its two
constituent companies.
The total cost savings of the deal – $1.7 billion per year – will drive significant expansion
over the next four years. End-users can expect better prices, more complete solutions, and
increased accessibility from Xerox over this time frame. The new company enjoys revenue
synergy opportunities that play to the strength of its new global reach.
Multinational Xerox clients can expect service that better responds to their needs
irrespective of their physical location. Whereas previously organizations would have
to deal with Xerox in the United States of America and Fuji Xerox in Australia, for example,
these enterprises now have a single point of contact for meeting their business
productivity needs.
Keep a close eye on the new Fuji Xerox, an $18 billion print-industry leviathan with
newfound resources, capabilities, and ambitions.
QBSI-Xerox  is and will remain a Xerox company. Find out how the new Fuji Xerox can serve
your organization's workplace productivity needs by speaking with a QBSI-Xerox specialist.

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