By Liana B. Baker and Laharee Chatterjee
(Reuters) - Xerox Corp (XRX.N) on Friday appealed a New York court's ruling to block its deal with Fujifilm Holdings <4901.T>, saying the decision to approve the deal rests with the companies' shareholders and not the court.
The move came after Xerox said its board and management team would stay as an agreement it had reached with dissenting shareholders Darwin Deason and Carl Icahn to oust them expired on Thursday.
In its appeal, Xerox disputed the court's findings that the board breached their fiduciary duties in approving the deal.
The New York Court temporarily blocked the transaction last week, finding Xerox Chief Executive Officer Jeff Jacobson "hopelessly conflicted" and that he sought to conclude the deal even though he was advised to end negotiations.
The printer and copier maker said in a statement on Friday that its board unanimously authorized the deal after "months-long discussions and deliberations."
"With the caveat that I have not been privy to these negotiations, I find the rejection of the settlement by the Xerox board to be extraordinary and highly unusual," said Guhan Subramanian, professor at Harvard's law and business schools.
Deason and Icahn said the agreement had expired over last-minute issues that arose in negotiations between the activists, Xerox and the judge before the court could act on the settlement to put it into effect ahead of the self-imposed deadline Thursday evening.
Xerox said the agreement expired because of the "absence of stipulations" related to activist shareholders ending their litigations.
Deason, who owns about 15 percent of the company, sued to block the merger, claiming Xerox's board failed shareholders by approving a deal that undervalues the company.
Charles Elson, professor of corporate governance at University of Delaware, said Xerox's move has created a lot of confusion in the market.
"I haven't seen this before. It may have happened somewhere but not at a company the size of Xerox. Ultimately the shareholders will decide, but this gives the activists more ammunition," Elson added.
Reuters previously reported that buyout firm Apollo Global Management LLC (APO.N) has approached Xerox Corp to express interest in a possible acquisition, casting uncertainty over the Fujifilm deal.
Fujifilm, which has objected to the settlement between Xerox and the activists, said it was satisfied the settlement had expired. Fujifilm has also said it is planning to appeal last week's court order.
Xerox and Fujifilm agreed in late January to a $6.1 billion deal that would merge the U.S. printer and copier maker into Fuji Xerox, an existing joint venture between Xerox and Fujifilm.
Growing uncertainties over the deal have driven Xerox shares down 12 percent since the settlement agreement on May 1.
(Reporting by Laharee Chatterjee and Shubham Kalia in Bengaluru, Makiko Yamazaki in Tokyo and Liana B. Baker in New York; Editing by Sayantani Ghosh, Stephen Coates and Saumyadeb Chakrabarty)