Xerox Considers a Hostile Bid for HP -- WSJ
November 22 2019 - 3:02AM
Dow Jones News
By Dave Sebastian
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 22, 2019).
Xerox Holdings Corp. said in a letter to HP Inc.'s board of
directors that it would take its $33 billion takeover bid to HP's
shareholders if the company doesn't reconsider Xerox's acquisition
offer by Nov. 25.
Xerox Chief Executive and Vice Chairman John Visentin said in
the letter on Thursday that Xerox is "very surprised" that HP's
board rejected the buyout offer of $22 a share, which comprises $17
in cash and 0.137 Xerox share for each HP share.
HP rejected Xerox's offer Sunday as too low and not in the best
interests of its shareholders. It expressed a willingness to
discuss a deal to combine with its smaller rival, though, saying it
needed more information about Xerox's business, through a process
known as due diligence.
Mr. Visentin said he finds HP's reasoning for rejecting the
buyout confusing, as HP's financial adviser, Goldman Sachs &
Co., had set a $14 price target with a "sell" rating for its stock
in October.
Goldman Sachs said Thursday that the price target is no longer
effective.
Xerox said its offer represents a 57% premium to Goldman's price
target and a 29% premium to HP's 30-day volume-weighted average
trading price of $17.
HP didn't respond to a request for comment.
If the two companies aren't able to agree on a mutual
due-diligence process by 5 p.m. Eastern time on Nov. 25, Xerox said
it would take its case directly to HP's shareholders.
Xerox said it remains willing to devote the resources necessary
to complete mutual due diligence over the next three weeks and
confirm the cost and revenue benefits it sees if the two companies
combine.
Xerox said it encourages HP "not to sanction further delay in
light of our extensive discussions to date."
Shares of Xerox closed 1% higher Thursday; HP shares closed down
0.3%.
The companies dominate different areas of the printer market and
have been cutting costs as the need for printed documents
declines.
Xerox, based in Norwalk, Conn., has in recent months held
discussions with Palo Alto, Calif.-based HP, but the companies
weren't in talks when Xerox made the offer.
Xerox primarily makes large printers and copy machines, while HP
mainly sells smaller printers and printing supplies. HP is also one
of the biggest PC makers in the world, though its printer business
is more lucrative.
The potential union has received the support of activist
investor Carl Icahn, who told The Wall Street Journal earlier this
month that the combination is a "no-brainer" that would increase
returns for shareholders of both companies.
Mr. Icahn has a long history with Xerox, in which he owns a
10.6% stake, and he revealed a 4.24% investment in HP that makes
him its fifth-largest shareholder, according to FactSet.
HP is set to report its fiscal fourth-quarter results Nov.
26.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
November 22, 2019 02:47 ET (07:47 GMT)
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