The likelihood of hostilities between PC maker HP Inc and printing giant Xerox erupting into the open has inched closer this week.
Last week it was reported that activist investor Carl Icahn had acquired a $1.2 billion stake in HP Inc, and was pushing for the proposed union of Xerox and HP, arguing that a combination of the printer makers could yield big profits for investors.
It should be noted that Icahn owns a 10.6 percent stake in Xerox, and now also owns a 4.24 percent stake in HP.
Following that development, Xerox subsequently tabled a $33.5bn buyout offer for HP Inc, pricing its shares at $22 per share.
But HP rejected this buyout offer at the weekend, saying it undervalued the company but that it was open to exploring a bid for the US printer maker.
This rejection has obviously stung, and Xerox’s management has on Thursday sent a letter to HP’s board of directors, with a very direct message.
“We were very surprised that HP’s Board of Directors summarily rejected our compelling proposal to acquire HP for $22.00 per share,” wrote John Visentin, vice chairman and CEO of Xerox. £ Frankly, we are confused by this reasoning in that your own financial advisor, Goldman Sachs & Co., set a $14 price target with a “sell” rating for HP’s stock after you announced your restructuring plan on October 3, 2019.”
Last month HP had revealed it would carry out a massive jobs cull in the lead up to Christmas period, when it announced it would axe 9,000 jobs.
“While we are glad to see that HP’s Board of Directors acknowledges the substantial merits of a business combination between Xerox and HP and are open to exploring the value opportunity for our respective shareholders, your response lacks a clear path forward,” wrote Visentin.
“You have requested customary due diligence, which we have accepted, but you have refused to agree to corresponding due diligence for Xerox,” he stated. “Any friendly process for a combination of this type requires mutual diligence – your proposal for one-way diligence is an unnecessary delay tactic.”
He then indicated that Xerox was prepared to pursue a hostile takeover of HP Inc if necessary.
“The Xerox Board of Directors is determined to expeditiously pursue our proposed acquisition of HP to completion – we see no cause for further delay,” wrote Visentin. “Accordingly, unless you and we agree on mutual confirmatory due diligence to support a friendly combination by 5:00 p.m. EST on Monday, November 25, 2019, Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders.”
“We look forward to your prompt response,” Xerox concluded.
Some observers will suspect the influence of Carl Icahn behind the scenes.
Icahn made life very difficult for Michael Dell in 2012 and 2013, when he sought to derail his attempts to take Dell back into private ownership for example.
HP Inc it should be remembered was formed in 2015, by the split of Hewlett-Packard into two separate companies.
HPE retained the core enterprise business, such as servers, storage and networking, while HP Inc took on the PC, printer and hardware unit.
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