Darwin Deason has taken legal action against Xerox Corp (NYSE:XRX) for planning a spinoff. Deason happens to be one of the company’s largest shareholders.
Deason filed the lawsuit against Xerox in a Dallas District court on Tuesday. The lawsuit accused the company of planning to split the firm’s business process outsourcing unit and the copier and printer business. Once the split is complete, the printer and copier businesses would exist as a new firm known as Conduent. Xerox released a statement on Thursday saying that the lawsuit was not based on any merit. The company also stated that it is seeking the dismissal of the lawsuit.
“Mr. Deason’s lawsuit is meritless and we intend to seek its dismissal. We are continuing to move forward with our planned separation, which we expect to complete on schedule,” stated Carl Langsenkamp, a spokesman for Xerox.
The firm had announced in January that it was planning a spinoff that would lead to the formation of two publicly traded firms. One of the two firms would be a document technology firm that would be valued at $11 billion. The other firm would offer services to the government and various industries including transportation and health care and would be valued at $7 billion.
Deason argues that the spinoff would lead to unattractive low-growth for his investment in the document technology business. He argues that the idea behind the split is to reverse the $6.2 billion acquisition of Affiliated Computer Services Inc. which Deason founded. Since the acquisition of ACS by Deason, it has gone on to become the main business outsourcing operation for Xerox.
The ACS founder owns 6% of Xerox shares. Xerox initially acquired ACS so that it could boost its technology services and help in recovering from the declining hardware sector. The acquisition also allowed the company to expand its presence into other existing markets. Deason is also seeking to stop the split on grounds that the firm has denied him the right to convertible stake in Conduent.
Xerox stock closed the last trading session at $9.55.