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HP rejects Xerox bid, this time

HP rejects Xerox bid, this time

But remains ready to engage with Xerox

Credit: Dreamstime

HP Inc has rejected Xerox’s unsolicited takeover bid, understood to be in the range of US$33 billion, suggesting the offer “significantly undervalues” HP. 

However, the HP board of directors said in a statement released on 17 November that it remains ready to engage with Xerox to “better understand [its] business and any value to be created from a combination,” of the two companies.

“Our board of directors has reviewed and considered [Xerox’s] unsolicited proposal dated November 5, 2019 at a meeting with our financial and legal advisors and has unanimously concluded that it significantly undervalues HP and is not in the best interests of HP shareholders,” HP’s board of directors said in a statement. 

“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.

“We have great confidence in our strategy and our ability to execute to continue driving sustainable long-term value at HP,” the board said. “In addition, the board and management team continue to take actions to enhance shareholder value including the deployment of our strong balance sheet for increased repurchases of our significantly undervalued stock and for value-creating M&A [mergers and acquisitions].”

Moreover, the HP board said that while it recognises the potential benefits of consolidation, and is open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox, it has “fundamental questions” that need to be addressed in regards to its due diligence of Xerox. 

“We note the decline of Xerox’s revenue from US$10.2 billion to US$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,” the HP board stated. “In addition, we believe it is critical to engage in a rigorous analysis of the achievable synergies from a potential combination. 

“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,” the board said. 

News of the proposed bid emerged in early November, after The Wall Street Journal reported that that Xerox, somewhat flush with cash following the US$2.3 billion sale of ventures with Fujifilm, could make a cash-and-stock bid for HP, worth about US$27 billion.

Following widespread media speculation, the technology giant subsequently acknowledged the offer and refused to rule out the coming together of two market rivals, which would have created a PC and printing juggernaut if it had have progressed further.

Article updated on 3  March 2020 at 11:21am to clarify that Xerox's takeover bid was understood to be in the range of US$33 billion, not US$33 million as previously published.


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