Xerox Secured $24 Billion To Prove The Seriousness Of The HP Buyout Offer

By Amit Chowdhry ● Jan 8, 2020
  • Xerox has secured $24 billion to prove it is serious about its buyout offer for HP

Back in November, Xerox made an offer to buy out HP for $22 per share based on 77% cash and 23% stock or $17 in cash and 0.137 Xerox share per HP share. But then the HP board quickly rejected the offer citing the “conditional and uncertain nature of the proposal.” The HP board also said that it undervalued their company.

Xerox CEO John Visentin pointed out that the company has secured $24 billion in financial commitments to reduce concerns about whether it could be done to fund the buyout proposal. The $24 billion in binding financial commitments comes from Citi, Mizuho, and Bank of America.

“We have always maintained that our proposal is not subject to a financing contingency, but in order to remove any doubt, we have obtained binding financing commitments (that are not subject to any due diligence condition) from Citi, Mizuho, and Bank of America,” said Visentin in a letter address to HP shareholders. “My offer stands to meet with you in person, with or without your advisors, to begin negotiating this transaction.”

HP’s market valuation is currently more than $30 billion. And Xerox has a market valuation of between $7.5 billion to $8 billion.

Activist billionaire investor Carl Icahn has criticized HP’s board for rejecting the deal. According to CNBC, Icahn owns 10.85% of outstanding shares in Xerox and 4.24% of outstanding shares of HP.

Back in November, Visentin warned HP that it reconsider the rejection of the deal otherwise Xerox would take the case to HP shareholders directly. Xerox pointed out that the combination of the companies would help reduce debt and increase returns for shareholders along with driving more investments in innovation. And Xerox also said that HP has gaps in certain markets — which they could fill.

By setting up $24 billion in binding financial commitments, it will likely amp up the pressure in getting some sort of deal done.