Xerox and HP offer
Last week, Xerox Corporation proposed an “interesting” deal that involved buying HP for $22 per share in cash and 0.137 Xerox share for each HP share. However, HP thinks that the deal undervalues the company and says that the marriage between the two doesn’t make sense.
HP: Seriously, we don’t need you.
HP’s board of directors unanimously voted ‘no’ for Xerox’s takeover last week. They considered Xerox’s declining quarter over quarter revenue, which “raised significant questions” for HP regarding the trajectory of the company’s business and prospects.
“There continues to be uncertainty regarding Xerox’s ability to raise the cash portion of the proposed consideration and concerns regarding the prudence of the resulting outsized debt burden on the value of the combined company’s stock even if the financing were obtained,” said the letter published by HP on Sunday.
Last year, Xerox rejected the deal to merge with Fujifilm after investors Carl Icahn and Darwin Deason pushed back the deal and asked other investors to not support the merger, as it undervalues the firm. Earlier this month, Xerox announced that it will sell its 25% stake in Fuji Xerox for $2.5B.
HP mentions in the letter that the Fujifilm venture exit has left a “sizeable strategic hole” in Xerox’s business.
Xerox’s reply to HP’s No.
It looks like that if HP doesn’t accept the offer, Xerox will wage war. On Thursday, Xerox threatened HP to accept the offer or it will take its case to HP’s shareholders.
In the letter, Xerox’s Vice Chairman and CEO John Visentin said, “The overwhelming support our offer will receive from HP shareholders should resolve any further doubts you have regarding the wisdom of swiftly moving forward to complete the transaction”
Additionally, Xerox has given a strict deadline to agree to “a friendly combination by 5:00 p.m. EST on Monday, November 25, 2019.”
Both the companies are witnessing a dwindling business. Xerox’s revenue reduced from $10.2 billion to $9.2 billion in a year, while HP’s printing business is struggling and hence, the company plans to cut 9,000 staff globally, starting in 2020. Despite its declining revenue, Xerox’s determination to buyout HP, which is at least 3X its valuation, is inimitable.