Why HP (HPQ) Is Buying Poly (POLY) For $3.3 Billion

By Amit Chowdhry ● Mar 28, 2022
  • HP Inc. (NYSE: HPQ) announced it is buying Poly (NYSE: POLY) for $3.3 billion. These are the details.

HP Inc. (NYSE: HPQ) has announced a definitive agreement to buy Poly (NYSE: POLY), a leading global provider of workplace collaboration solutions, in an all-cash transaction for $40 per share, implying a total enterprise value of $3.3 billion, inclusive of Poly’s net debt.

This deal accelerates HP’s strategy to create a more growth-oriented portfolio, further strengthens its industry opportunity in hybrid work solutions, and positions the company for long-term sustainable growth and value creation.

Approximately 75% of office workers are investing to improve their home setups to support new ways of working. And traditional office spaces are also being reconfigured to support hybrid work and collaboration, with a focus on meeting room solutions. Currently, there are over 90 million rooms, of which less than 10% have video capability. Plus the office meeting room solutions segment is expected to triple by 2024.

Poly is going to help drive the growth and scale of HP’s peripherals and workforce solutions businesses. And peripherals represent a $110 billion segment opportunity growing 9% annually, driven by the need for more immersive experiences. Workforce solutions represent a $120 billion segment opportunity that is growing 8% annually, as companies invest in digital services to set up, manage, and secure more distributed IT ecosystems. Poly’s devices, software, and services – combined with HP’s strengths across compute, device management, and security – create a robust portfolio of hybrid meeting solutions.

Poly is known as a leader in video conferencing solutions, cameras, headsets, voice, and software. And together, HP and Poly will deliver a complete ecosystem of devices, software, and digital services to create premium employee experiences, improve workforce productivity, and provide enterprise customers with better visibility, insights, security, and manageability across their hybrid IT environments.

HP is expecting the transaction to be immediately accretive to HP’s revenue growth, margins, and non-GAAP EPS at the close. And with the expanded value proposition of a complete hybrid work solution, combined with HP’s scale and go-to-market capabilities, HP expects to realize substantial revenue synergies in peripherals as well as meeting room and workforce solutions. 

HP is going to be able to cross-sell across its global commercial and consumer sales channels while driving incremental sales by combining Poly’s products with HP’s PC portfolio. As a result, HP is expecting to achieve $500 million of revenue synergies by FY25 and accelerate Poly’s revenue growth to an approximately 15% CAGR over the first three years after closing. Plus HP expects the transaction to improve Poly’s operating margins by approximately six percentage points from current levels by FY25, driven by scale efficiencies across the supply chain, manufacturing, and overhead.

The deal is expected to close by the end of calendar 2022, subject to Poly stockholder approval, required regulatory clearances, and the satisfaction of other customary closing conditions. HP is going to finance the transaction through a combination of balance sheet cash and new debt.

This deal is consistent with HP’s capital returns program target. HP remains committed to aggressively buying back shares of at least $4 billion in FY22, and returning significant capital to shareholders while continuing to invest in growth.

KEY QUOTES:

“The rise of the hybrid office creates a once-in-a-generation opportunity to redefine the way work gets done. Combining HP and Poly creates a leading portfolio of hybrid work solutions across large and growing markets. Poly’s strong technology, complementary go-to-market, and talented team will help to drive long-term profitable growth as we continue building a stronger HP.”

— Enrique Lores, President and CEO of HP

“I am thrilled about the opportunity this represents for Poly, our employees, partners and customers. The combination gives us an opportunity to dramatically scale, reaching new markets and channels, supercharging our innovation with a like-minded partner. This transaction offers compelling and certain value for our shareholders and speaks to the hard work done by our teams to become a recognized leader in helping businesses everywhere meet the challenges of a generational disruption in the way people work.”

— Dave Shull, Poly CEO and President

“Highest quality audio and video has become an essential component of work across every industry, whether in an office, at home, or on the go. Bringing the Poly and HP offerings together will unlock new opportunities to partner with Zoom and turn any space into a hub for dynamic video collaboration.”

— Eric Yuan, Founder and CEO of Zoom