Coronavirus: Xerox Ends Hostile Takeover Bid For HP

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Setback for Carl? Printer maker Xerox cites Coronavirus pandemic ‘turmoil’ as reason for withdrawing $35 billion bid for HP

Xerox Holdings has confirmed it is withdrawing its hostile $35 billion bid to acquire PC giant HP, that has caused a lot of bad blood between the two firms.

In an emailed statement to Silicon UK, the printer maker said that the “current global health crisis and resulting macroeconomic and market turmoil caused by Covid-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP.”

It comes after HP last week wrote a hard hitting letter to its shareholders, outlining its position as to why now was not the time for Xerox to be pursuing a hostile takeover.

HP

Bid withdrawal

HP said the focus of the company should on “managing the unprecedented Covid-19 pandemic with urgency and a deep sense of care.”

Meanwhile Xerox told Silicon UK that it is “withdrawing our tender offer to acquire HP and will no longer seek to nominate our slate of highly qualified candidates to HP’s Board of Directors.”

“While it is disappointing to take this step, we are prioritizing the health, safety and well-being of our employees, customers, partners and other stakeholders, and our broader response to the pandemic, over and above all other considerations,” said Xerox.

And it insisted that there remains “compelling long-term financial and strategic benefits from combining Xerox and HP.”

“The refusal of HP’s Board to meaningfully engage over many months and its continued delay tactics have proven to be a great disservice to HP stockholders, who have shown tremendous support for the transaction,” Xerox claimed.

“Xerox’s Board of Directors and management team are grateful for the significant backing we received from both Xerox and HP stockholders throughout this process,” it said.

“We thank the talented individuals who agreed to stand for election to the HP Board, making time in their busy schedules to take on this responsibility when HP’s existing Board did not,” said Xerox. “And finally, we thank the banks who agreed to finance this acquisition, who never wavered in their commitments, even during the market turmoil caused by Covid-19.”

Irresponsible bid?

HP for its part has consistently expressed deep concerns about the “irresponsible capital structure that is reflected in Xerox’s proposal.”

Last month HP adopted another poison pill that will see HP CEO Enrique Lores receive 50 percent more in a pay out, if he is fired in the event of a successful hostile takeover.

That came after HP had once again last month rejected an improved takeover offer to HP’s shareholders (its second such hostile takeover offer), in an effort to bypass the PC maker’s board of directors.

Hostile takeover

Xerox had last this month increased its hostile offer price to $24.00 per share (from $22.00 per share), raising its original $33.5 billion takeover bid to $35 billion.

That came after HP’s board of directors had in January rejected an unsolicited takeover offer from Xerox, saying the deal “significantly undervalued” the PC maker.

Xerox had begun its hostile bid for HP just before Christmas, after it made good its threat to approach HP shareholders directly with its leveraged buyout offer.

Xerox had initially set a deadline of 25 November 2019 for HP’s board of directors to respond to Xerox’s $33.5bn buyout offer for the PC maker.

But HP’s board refused to engage with Xerox and failed to open its books so Xerox could conduct due diligence.

The battle had begun when activist investor Carl Icahn acquired a $1.2 billion stake in HP and pushed for the proposed union of Xerox and HP, arguing that a combination of the printer makers could yield big profits for investors.

Icahn is said to own 10.85 percent of Xerox and 4.24 percent of HP.

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Author: Tom Jowitt
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