Deals and IPOs

A second front opens in the battle for Xerox as Deason sues to replace board

Key Points
  • The lawsuit asks the court to waive a December 2017 deadline shareholders had to nominate director candidates, citing "radical" changes since that date.
  • In a joint letter, Deason and Icahn make their case directly to Xerox shareholders, saying they think the board is "terrified" of giving them a chance to vote on a full slate of directors.
Source: Xerox

Darwin Deason has opened another front in his battle with Xerox, filing a second lawsuit seeking to nominate a full slate of directors to the company's board, and he has Carl Icahn's blessing.

The lawsuit asks the judge to waive the December 2017 deadline shareholders had to meet to nominate directors before Xerox's annual meeting, citing "radical" changes to the company that happened after that date.

At the end of January, Xerox and Fuji announced that Fuji would acquire 50.1 percent of Xerox, revealing an agreement Deason says was concealed for 17 years from Xerox shareholders: that Fuji would control Xerox's intellectual property and manufacturing rights in Asia.

Deason, who is Xerox's third-largest shareholder, is seeking to nominate 10 directors. He initially asked the company to waive the deadline but Xerox rejected that request this week. CNBC's David Faber reported that one of Deason's nominees could be a potential new CEO.

Right now, shareholders can only vote on the current Fuji deal and the Xerox board. Deason is trying to get another option on the table: letting shareholders vote on a whole new board that could go after a better deal with Fuji.

In a joint letter to Xerox shareholders on Friday, Deason and Icahn said, "We believe the Board is so scared that they will use every technical advantage at their disposal to thwart our efforts to prevent control of this venerable American icon from being sold on the cheap."

Shares of Xerox fell 1.4 percent on Friday.