Xerox's third-largest investor claims the recently announced joint venture deal between the printer company and Fujifilm's parent company represents a fraudulent scheme 17 years in the making.

In a suit filed in state Supreme Court in New York County, Darwin Deason alleges that during a presentation to investors early in February, Xerox officials made public for the first time that the agreement contained a “crown jewel” lock-up right.

The previously undisclosed agreement, according to Deason, was bad enough on its merits: Fuji would control Xerox's intellectual property and manufacturing rights in the $36 billion Asia-Pacific market in the event that Xerox were to sell off “just” 30 percent of the company to someone else. According to Deason, the agreement “effectively blocks any chance of a transparent and fair sale process.”

Making things more “shocking[],” Deason alleges that the agreement was made by Xerox managers and concealed from investors for nearly two decades.

“In fact, the 'end game' for Xerox—a sale to Fuji—was decided 17 years ago with this undisclosed 'crown jewel' lock-up right granted to Fuji, and shareholders had absolutely no clue,” Deason alleges.

The deal to combine Xerox with a 50-year joint venture with Fujifilm was announced on Jan. 31. According to details provided by Fujifilm, the Japanese company would take a 50.1 percent stake in Xerox. Shareholders were promised more than a 15 percent premium on Xerox shares that would result in a $2.5 billion special cash dividend. The deal promised to deliver more than a billion dollars in savings.

According to Deason, the agreement represents a breach of fiduciary duties by Xerox's board and executive officers. Chairman Robert Keegan and CEO Jeff Jacobson, along with numerous other directors, are allegedly “dramatically” undervaluing Xerox in a deal that “disproportionally favors Fuji,” the investor alleges. If the deal is allowed to go through, Deason claims, “Xerox shareholders will be virtually powerless over the future direction of their investment and will have no opportunity to receive a true control premium for their shares.”

The whole situation could have been avoided, according to Deason. After Fuji Xerox faced an accounting scandal in 2017 for overstating revenue by hundreds of millions of dollars, Xerox was in a position to terminate joint ventures over Fuji's “misconduct,” according to Deason. Doing so would have allowed for Xerox to shed “encumbrances” and enter into future negotiations as a standalone company.

Deason claims Xerox's directors are making matters worse by agreeing to make the “crown jewel” controls permanent by agreeing in the transaction documents not to terminate any agreement pending the closing of the deal.

“Simply put, the proposed transaction is the product of deceit and bad faith conduct by the director defendants and must be enjoined,” Deason stated in the complaint.

In a statement provided by a spokesman, Xerox called Deason's allegations meritless and vowed to “vigorously defend itself.”

“After having considered all strategic alternatives available to the company, Xerox's board of directors remains steadfast in its belief that the combination with Fuji Xerox is the best path to create value for the company and its shareholders,” the company said. “It is unfortunate that Mr. Deason is seeking to interfere with Xerox shareholder's right to decide and is relying on meritless legal claims. Xerox has fully disclosed the joint venture agreements, and the company will respond to Mr. Deason's legal claims through the appropriate legal channels in due course.”

A Fujifilm representative did not respond to a request for comment.

Deason is represented by King & Spalding in the matter.