HP Rejects Xerox Offer But Remains Open to a Deal -- Update
By Cara Lombardo
HP Inc. rejected a $33 billion takeover offer from Xerox
Holdings Corp. as too low, but the PC and printer maker made clear
it is interested in discussing a deal to combine with its smaller
Xerox's unsolicited offer of $22 a share significantly
undervalues the company, HP's board said in a public letter to
Xerox Chief Executive John Visentin on Sunday. It also voiced
concern about the debt a transaction would put on the combined
company and said it needs more information about Xerox's business,
known as due diligence.
Still, HP said it recognizes the benefits of consolidation and
is "open to exploring a potential combination with Xerox."
A Xerox official couldn't immediately be reached for
Xerox, which has a market value of $9 billion, on Nov. 5 offered
$17 in cash and 0.137 of its shares for each HP share.
The companies dominate different areas of the printer market and
have both been cutting costs as the need for printed documents
declines. They had previously discussed combining forces but
weren't in talks when Xerox made the offer.
Xerox primarily makes large printers and copy machines, while HP
mainly sells smaller printers and printing supplies. HP is also one
of the biggest PC makers in the world, though its printer business
is more lucrative.
The potential union got a significant push last week from
activist investor Carl Icahn, who told The Wall Street Journal that
a deal is a "no-brainer" that would increase returns for
shareholders of both companies. Mr. Icahn has a long history with
Xerox, in which he owns a 10.6% stake, and he revealed a 4.24%
investment in HP that makes him its fifth largest shareholder,
according to FactSet.
Mr. Icahn indicated he is open to alternate structures too,
which presumably include an HP takeover of Xerox, an approach some
analysts have said may make more sense.
In a sign that shareholders could be receptive to a deal, both
companies' stock prices have jumped since Xerox's offer became
public. HP's shares closed Friday at $20.18, almost 10% above where
they had been trading, while Xerox's closed 7% higher at
HP in its letter Sunday urged Xerox to let it perform additional
due diligence so it can better understand Xerox's recent revenue
declines and analyze potential cost savings from a combination,
which Xerox has pegged at roughly $2 billion.
Xerox, based in Norwalk, Conn., had held discussions with Palo
Alto, Calif.-based HP in recent months, but the talks broke down
after Xerox wanted to move more quickly than HP, according to
people familiar with the matter.
Xerox said in its offer letter, which HP disclosed Sunday, that
it believes due diligence and negotiations could be completed in
three to four weeks. HP said Sunday that with Xerox's cooperation,
it can "quickly evaluate the merits of a potential
HP is set to report its fiscal fourth-quarter results Nov.
Write to Cara Lombardo at firstname.lastname@example.org
(END) Dow Jones Newswires
November 17, 2019 17:10 ET (22:10 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Historical Stock Chart
From Jul 2020 to Aug 2020
Historical Stock Chart
From Aug 2019 to Aug 2020