- The HP board has unanimously rejected an offer from Xerox saying that this deal undervalues the company
The HP board has unanimously rejected an offer from Xerox saying that the deal undervalues the company and is not in the interest of the shareholders. Xerox has offered $22 per share in HP based on 77% cash and 23% stock (or $17 in cash and 0.137 Xerox share for each HP share).
“In reaching this determination, the Board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock,” said Xerox CEO John Visentin in a statement.
Last month, HP said it was going to cut between 7,000 and 9,000 jobs by the end of 2022 as part of a restructuring plan that will save $1 billion per year. This is about 16% of its 55,000 employees.
What makes this deal even more interesting is that HP is worth $29 billion and it is 3 times the size of Xerox based on market cap.
“We note the decline of Xerox’s revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects,” added HP’s board. “In addition, we believe it is critical to engage in a rigorous analysis of the achievable synergies from a potential combination.”
HP is the printer and PC arm, which operates separately from HPE. HPE sells data storage tools and servers.
Billionaire investor Carl Icahn has a 10.6% stake in Xerox and recently acquired a $1.2 billion stake in HP. Icahn strong believes that a merger of the two companies would be in the interest of shareholders since there could be cost savings potential and a bigger portfolio of printers.
HP and Xerox both are fending off the popularity of paperless statements and e-signature tools for documents. Plus there are a number of overseas aftermarket companies that sell printer ink and cartridges.
Xerox submitted its original proposal on November 5. And Xerox said that a merger would help the companies save $2 billion in costs within two years.
“With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” added the HP board in the statement.
Featured image credit: HP
