Xerox's Largest Individual Shareholder Files Lawsuit Over Spin-off Plan

(RTTNews) - Billionaire Darwin Deason, the largest individual shareholder of Xerox Corp. (XRX), has filed a lawsuit seeking to block the planned spin-off of the copier and services giant, reports said. Deason, who owns around 6.1 percent stake through convertible preferred stock, filed the lawsuit in a U.S. District Court in Dallas alleging that the company violated a previous agreement.

Calling the suit meritless, Xerox reportedly said the company would seek its dismissal and is continuing to move forward with its planned separation. The stocks were given to him in 2010 when Xerox acquired Deason- founded business Affiliated Computer Services Inc. or ACS in a $6.4 billion deal.

AS announced in January, Xerox is planning to divide its legacy copier and printer business from its business process outsourcing business. Xerox's plan is to house the traditional copier business, while business services, including the ACS business, would be called Conduent Inc.

In his complaint, Deason noted that Xerox would turn some of his stake, $300 million worth of preferred shares, into a stake in the legacy business after the separation, instead of in the faster growing Conduent.

The lawsuit reportedly claims, "The reorganization as currently proposed will trap Mr. Deason's Series A Preferred investment position in the post-Reorganization Xerox—a low-growth document technology business that will have a considerably diminished outlook and credit profile—without any stake in the valuable BPO business at Conduent."

A Xerox spokesman was quoted as saying that Deason's preferred shares would stay with the original company as the split is structured as a spin-off of the business-services unit.

Deason has been in talks with xerox over his investment for several weeks, and has also sent a letter seeking for board seats at both companies after the split.

Meanwhile, Xerox's biggest institutional investor Carl Icahn has supported the plan to split the company. The Icahn's hedge fund held a nearly 10% stake as of June 30.

The company has agreed to add one of Icahn's representatives to its board, while he was promised three board seats at Conduent.

Xerox, which is moving with the spin-off plan, has already named CEOs for each of the two companies. The company expects the complete the planned separation on schedule.