* Fujifilm says to slash 10,000 jobs at Fuji Xerox
* Xerox to combine with Fujifilm JV: WSJ
* Fujifilm to take control of new entity: WSJ
* Icahn, Deason had demanded Xerox CEO ouster, better terms on JV
* Fujifilm shares tumble after WSJ report

Japan's Fujifilm Holdings said it is cutting 10,000 jobs globally at its joint venture with Xerox Corp to cope with a decline in the photocopying business, amid speculation of a new deal between the two companies.

Fujifilm owns 75 percent of the joint venture, called Fuji Xerox, which accounts for nearly half of the Japanese company's sales and operating profit. Fuji Xerox had over 47,000 employees as of March 2017, according to its website, meaning the job cuts would likely slash its workforce by more than a fifth.

Xerox Corp owns the remaining 25 percent of Fuji Xerox and has faced pressure from investors to explore strategic options and negotiate better terms on the venture with Fujifilm.

The Japanese company's job cuts announcement comes after the Wall Street Journal, citing people familiar with the matter, reported that Xerox Corp is nearing a deal with Fujifilm that would cede control of the US photocopier pioneer to Fujifilm.

‘The market environment surrounding the company's subsidiary Fuji Xerox has grown increasingly severe,’ Fujifilm said in a statement on Wednesday.

Fujifilm said it would book restructuring costs of 49 billion yen ($450.95 million) in the second half of the fiscal year through March, lowering its operating profit forecast for the year to 130 billion yen from a previous 185 billion yen.

It said the planned restructuring measures involve job cuts and closing or integrating manufacturing bases, and would lower annual costs by 50 billion yen from the year ending March 2020.

The Journal report said a deal would be announced as soon as Wednesday, and would include plans to combine Xerox with the five-decades-old Fuji Xerox. Xerox shareholders would own just under half of the resulting entity and would get an implied premium for their stock and cash, it said.

The talks could still fall apart or the terms could change, the paper said, adding that Xerox shares would continue to trade following any deal.

Fujifilm and Xerox declined to comment on the report. Fujifilm is due to hold a news conference at 5 p.m. (0800 GMT).

Xerox has been under pressure to find new growth sources as it struggles to reinvent its legacy business amid waning demand for office printing. Fujifilm is also trying to streamline its copier business with a larger focus on document solutions services.

Xerox has been targeted by activist investor Carl Icahn and shareholder Darwin Deason, who joined forces last week to push Xerox to explore strategic options, oust its ‘old guard’, including its CEO, and negotiate better terms for its decades-long deal with Fujifilm. Icahn is Xerox's biggest shareholder, with a 9.72 percent stake.

Fujifilm shares fell 8.3 percent on Wednesday ahead of its announcement of job cuts but after the Journal report about a deal with Xerox. Xerox shares ended down 0.5 percent on Tuesday.

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