Xerox Sued by Largest Individual Investor Over Plans To Split the Company

xeroxDarwin Deason is Xerox Corp’s largest individual shareholder (and the fourth largest shareholder, overall). However, that may not be the case much longer as the billionaire has just filed a lawsuit to prevent the company from splitting into two public companies.

Deason filed the suit on Tuesday in a Dallas, TX US district court citing violations of an agreement Xerox made with him in 2009. This agreement was part of a negotiation for Xerox to acquire his business, Affiliated Computer Services, Inc, for roughly $6 billion in cash and stock options. In he court papers, he claims that Xerox had originally agreed to give him preferred shares that would compensate him for his stake in Affiliated Computer Services.

He reports, however, that the company split will instead leave him with shares in a company that he says is “unattractive,” and “low-growth.” Additionally, the court filing details that “The reorganization will extinguish important rights and massively destroy the value of Mr. Deason’s unique investment; [and] lose the opportunity to participate in the growth of the business [he] was responsible for building.”

Looking at it another way, Deason had owned a 6.1 percent stake in Xerox at the beginning of this year. The suit he has filed, though, claims that Xerox will turn at least part of this stake—worth roughly $300 million in preferred shares—into a stake in the legacy business instead in Conduent (which is what they had originally agreed upon).

In response to the filing, Xerox spokesperson Carl Langenshamp comments, though, “We are confident that the separation and the strategic transformation program we are implementing will enhance value for our shareholders today as well as for future shareholders of Xerox and Conduent.”

Similarly, David Holt agrees. The equities analyst with New York City-based accounting and legal research firm CFRA Research does not think that this lawsuit will interfere with Xerox’s plan to split. He comments, “Despite potential for ongoing risks from this lawsuit, we still see the split of the companies occurring by the end of the year.
Furthermore, Xerox defends that Deason’s lawsuit has no merit; as such the company is seeking to have the lawsuit dismissed.

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