HP Rejects Xerox’s Sweetened Takeover Offer

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Still a firm no. HP’s board of directors tell Carl Icahn and Xerox that their $35 billion takeover offer still undervalues it

PC maker HP has once again rejected a takeover offer from printer maker Xerox Holdings, in a move that will do little to ease the bad blood between the two firms.

Earlier this week Xerox had taken its improved takeover offer directly to HP’s shareholders (its second such hostile takeover offer), in an effort to bypass the PC maker’s board of directors.

But HP made clear to its shareholders that it doesn’t believe the offer to be good enough, and it once again said the Xerox offer undervalued the personal computer maker.

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Hostile takoever

Xerox had earlier 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.

After that rejection, HP implemented a poison pill plan to stop investors from amassing more than 20 percent stake in the company.

And now in the latest twist, Chip Bergh, chair of HP’s board, was quoted by Reuters as saying this week that the Xerox offer would leave shareholders with an investment in a combined company that is burdened with an irresponsible level of debt.

“(It) would subsequently require unrealistic, unachievable synergies that would jeopardize the entire company,” Bergh reportedly stated.

He pointed to declining sales at Xerox and said its recent sale of its interest in the Fuji-Xerox joint venture raised concerns about the company’s future position.

Xerox opted to to sell its 25 percent stake in Fuji Xerox, its joint venture with Fujifilm Holdings, for $2.3 billion in November last year, following investor activism that scuppered a deal between the two companies.

As a result of all this, HP on Thursday reportedly requested shareholders to reject Xerox’s tender offer, saying it would disproportionately benefit Xerox shareholders relative to HP shareholders.

Ongoing battle

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 hostilities began after 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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