UPDATE 1-Xerox near deal that would cede control to Fujifilm - WSJ

* Xerox to combine with Fujifilm JV - WSJ

* Fujifilm to take control of new entity - WSJ

* Xerox shareholders to own just under half of new entity - WSJ

* Icahn, Deason had demanded Xerox CEO ouster, better terms on JV (Recasts, adds details from report, changes packaging slug)

Jan 31 (Reuters) - Xerox Corp is nearing a deal with Fujifilm Holdings Corp that would cede control of the U.S. photocopier pioneer to its Japanese competitor, The Wall Street Journal reported citing people familiar with the matter.

The deal, to be announced as soon as Wednesday, would combine Xerox with the five-decades-old joint venture it has with Fujifilm, the Journal said. Xerox shareholders would own just under half of the resulting entity and would get an implied premium for their stock and cash, it said.

The talks could still fall apart or the terms could change, the paper said, adding that Xerox shares would continue to trade following any deal.

Fujifilm and Xerox declined to comment on the report.

Xerox has been under pressure to find new growth sources as it struggles to reinvent its legacy business amid waning demand for office printing. Fujifilm is also trying to streamline its copier business with a larger focus on document solutions services.

Xerox has been targeted by activist investor Carl Icahn and shareholder Darwin Deason, who joined forces last week to push Xerox to explore strategic options, oust its "old guard," including its CEO, and negotiate better terms for its decades-long deal with Fujifilm. Icahn is Xerox's biggest shareholder, with a 9.72 percent stake.

The two firms' joint venture, Fuji Xerox, was formed in 1962 and has limited prospects as demand for office printing declines.

The joint venture, which is 75 percent owned by Fujifilm, now accounts for nearly half of Fujifilm's sales and operating profit and sells photocopy products and services in the Asia-Pacific region.

Fujifilm shares were down 0.4 percent in early morning trade on Wednesday. Xerox shares ended down 0.5 percent on Tuesday. (Reporting by Diptendu Lahiri in Bengaluru and Minami Funakoshi in Tokyo; Editing by Sandra Maler and Muralikumar Anantharaman)