Fortune

PAPER JAM!

Printer giant Xerox planned to sell itself to Carl Icahn teamed up with a Texas billionaire the craziest, nastiest, most unpredictable Fujifilm of Japan. But that was before activist titan named Darwin Deason to block the deal. An inside look at showdown raging on WallStreet today.

RANK

291

COMPANY PROFILE

XEROX

REVENUES

$10.3 BILLION

PROFITS

$195 MILLION

EMPLOYEES

36,100

TOTAL RETURN TO SHAREHOLDERS (2007–2017 ANNUAL RATE)

–2.1%

Fujifilm chairman and CEO Shigetaka Komori has hungered to buy Xerox for decades.

CARL ICAHN TYPICALLY works alone. The dark prince of corporate raiders shuns the usual clutch of outside attorneys, investment bankers, and PR firms that rival activists assemble for their assaults. Instead, Icahn relies on an in-house team of fewer than a dozen financial analysts and lawyers, a brain trust that toils alongside their controversial, 82-year-old boss on the 47th floor of Manhattan’s General Motors Building. But that’s just his support staff. As for partners, well, what’s the point?

Icahn, whose Icahn Enterprises ranks No. 136 on this year’s Fortune 500, hardly needs any financial backing. He commands a war chest in cash and securities of more than $30 billion. Neither does he crave any counsel from peers on strategy. Icahn prides himself on personally composing the notorious attack letters he sends to boards of directors, piling on outraged barbs to skewer “ostrich” directors “with their heads in the sand” or those who’ve agreed to sell their companies “for a bowl of porridge.”

It was certainly Icahn’s intention to go it alone again when, in late 2015, he identified Xerox as a target. The once-great company was an ideal candidate for Icahn. It consisted of two divergent businesses, both of which were performing poorly—its traditional office products franchise, and a large division that provided back-office bill-paying and data processing services to companies and governments, a field called business process outsourcing (BPO). Icahn reckoned that he could clean up by prodding Xerox to spin off its BPO arm. Instead of a muddled mass no one wanted to buy, Xerox would split into two pure-play companies—either of which could be a takeover target at a fat premium. If buyers didn’t show up right away, Icahn figured he could improve performance by installing new management and profit by driving up each company’s stock price.

“Xerox was one of the worst-run companies I ever saw,” Icahn tells Fortune. “Both sides of the business were being mismanaged. It was a no-brainer to split it up and bring in new management. Xerox was doing nothing with a great brand—how many companies have a name that doubles as a famous verb?”

Icahn got his way when, at the beginning of 2017, Xerox spun off the BPO business as a new company called Conduent. And so far that half of the deal has proved a winner: Conduent has flourished, and its solid stock performance has generated a return of more than $100 million for Icahn.

But Icahn’s crusade to cash in on Xerox, where he’s the largest individual shareholder with 9.2% of the stock, has proved to be one of the most complicated of his half-century career. It’s been so challenging, in fact, that Icahn has made an exception to his usual rule and teamed up with a partner: Darwin Deason, a feisty 78-year-old who sold the outsourcing business that now constitutes most of Conduent to Xerox in 2010 for $6.4 billion and remains Xerox’s third largest shareholder. Except in age and wealth, the two men are the oddest of pairings. The 6-foot-4 Icahn, who’s never lost his thick Queens accent despite a Princeton education, is a creature of Wall Street, and the quintessential deal junkie. The compact Deason—who in both tenacity and appearance resembles a bulldog—is a business builder who

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