Xerox Firms Up Financing for Bid to Take Over HP
January 06 2020 - 6:11AM
Dow Jones News
By Cara Lombardo
Xerox Corp. has secured financing for its takeover offer for HP
Inc., according to people familiar with the matter, a sign the
printer-and-copier company is pushing forward with an unsolicited
$33 billion bid that its larger rival has resisted.
Citigroup Inc., Mizuho Financial Group Inc. and Bank of America
Corp. have agreed to back Xerox by lending up to $24 billion, the
people said.
Xerox on Nov. 5 made a cash-and-stock bid for HP, whose market
value has since risen to almost $30 billion, making it nearly four
times Xerox's size. HP rejected the bid as too low and not in the
best interests of its shareholders. It also cast doubt on whether
Xerox would be able to raise the cash portion and whether the
combined company could handle the amount of debt it would likely
require.
At the time of the bid, Xerox had only an informal funding
pledge. The new commitments represent a vote of confidence by major
financial institutions in the logic of the deal and the combined
company's ability to generate adequate cash flow. It also
underscores Xerox's desire to be the buyer in a potential
combination, the people said, after some analysts have suggested it
could be hoping for HP to buy it.
Xerox has argued the two companies, which both operate in the
slowing printing industry, could yield cost savings of more than $2
billion by combining forces. They had previously discussed a tie-up
but weren't in talks when Xerox offered $17 in cash and 0.137 of
its shares for each HP share, or $22 a share.
While HP in its original rejection expressed a willingness to
discuss a deal to combine with Xerox, the situation turned
contentious when the two sides couldn't agree on terms to examine
each others' businesses.
Activist investor Carl Icahn has stakes in both companies and
supports a combination. After HP rejected Xerox's bid, Xerox said
it would take its case directly to HP shareholders. The two sides
have since been separately courting shareholders in an attempt to
gain their support.
Should HP continue to be unreceptive, it is conceivable that Mr.
Icahn or Xerox would launch a proxy fight at HP in the coming
weeks.
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.
Both companies' stocks have remained elevated since The Wall
Street Journal reported in November on Xerox's plans to make an
offer, with HP's shares closing Friday at $20.53 and Xerox's
closing Friday at $36.45.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
January 06, 2020 05:56 ET (10:56 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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