HP Inc. (NYSE: HPQ) today issued the following letter to
shareholders:
Dear HP Shareholder,
As a community, we are all focused on managing the unprecedented
COVID-19 pandemic with urgency and a deep sense of care. We are
committed to doing everything we can to support those in need and
respond to the challenges at hand. This pandemic is still
unfolding, and it will impact people, the economy and business
activities for months, if not longer. Our primary responsibility in
this difficult period is to focus on HP’s business and address the
needs of our ecosystem of stakeholders around the world, including
our shareholders, our millions of customers, our 250,000 partners,
and our team of approximately 55,000 employees. We are actively
managing many challenges, including assuring the health and safety
of our people, addressing supply chain disruptions, monitoring and
addressing our customers’ liquidity needs and, more broadly,
ensuring HP is well-positioned to support people working
remotely.
At the same time, we are committed to protecting your investment
in HP. Since Xerox launched its unsolicited exchange offer and
nominated directors, the global social, economic and financial
environments have changed radically. Despite this, Xerox continues
to advance its tender offer and its proposed slate of directors in
an effort to force a combination.
It is important for shareholders to understand that, under these
circumstances and consistent with our fiduciary duties, we believe
that we should not divert valuable time, attention and resources to
a dialogue with Xerox about its proposed transaction. Any complex,
large-scale, highly leveraged transaction in the current economic
environment could be disastrous for HP, its shareholders and our
entire ecosystem. While we remain open-minded about M&A as a
tool to add value for HP shareholders at the right time and on the
right terms – it’s abundantly clear that now is not that time.
Our focus must now be on ensuring that we remain strong and
resilient throughout this crisis while continuing to position the
business for the opportunities ahead. This includes continuing to
advance our leadership in our core businesses and disrupting new
industries with breakthrough innovation, while significantly
reducing our costs to become a more agile company.
HP is a strong company with market-leading positions across
Personal Systems, Print, and 3D Printing & Digital
Manufacturing. We have a healthy cash position and balance sheet
that helps us to navigate unanticipated challenges such as the
crisis now before us, while preserving strategic optionality to
allow us to build on our strengths for the future.
We have consistently expressed deep concerns about the
irresponsible capital structure that is reflected in Xerox’s
proposal. Their proposed structure would saddle HP with a level of
debt that it could not support, potentially leaving the company
without the cash needed to effectively run the business. We believe
this would put the company at risk of being in financial distress
immediately upon consummation of Xerox’s proposed transaction. On
top of this, the highly leveraged capital structure Xerox wants to
implement could threaten the stability of the entire HP ecosystem
and the livelihoods of our employees, customers and
partners.
With regard to the cash portion of Xerox’s proposal, it is also
important that HP shareholders understand that there would be six
to 12 months of significant uncertainty before knowing whether the
conditions are satisfied, and the transaction could be funded and
closed. Even if Xerox is able to maintain its bridge commitments
and raise additional equity financing, which is far from certain in
the current climate, there are many conditions to its proposal that
create uncertainty. These include regulatory approval across many
countries, funding of the bridge commitments, new funding for the
ongoing business, and Xerox’s securing approval of the transaction
by its own shareholders.
We remain firmly committed to creating value for our
shareholders and the principles that we have articulated that drive
value. This includes our focus on execution of our recently
announced plans, achieving the cost savings we have announced, and
returning capital to our investors while dealing with the
unprecedented new circumstances in which we must now operate.
We continue to be guided by our mission and values, as well the
discipline of our management team and board who have the
experience, skills, long-term perspective and temperament to
provide stability and help HP navigate through the challenges and
opportunities ahead.
We believe the Xerox proposal fundamentally undervalues HP,
threatens the future of both companies, and creates an unacceptable
level of risk to both HP and Xerox shareholders. Our duty now is to
protect our organization – and your investment. And that’s exactly
what we are going to do.
On Behalf of Your Board of Directors,
[Signature] |
[Signature] |
Enrique Lores |
Chip Bergh |
President & CEO |
Chairman of the Board |
Forward-Looking Statements This document
contains forward-looking statements that involve risks,
uncertainties and assumptions. If the risks or uncertainties ever
materialize or the assumptions prove incorrect, actual results may
differ materially from those expressed or implied by such
forward-looking statements and assumptions.
All statements other than statements of historical fact are
statements that could be deemed forward-looking statements,
including but not limited to any statements about the exchange
offer or Xerox’s director nominations; any statements of
expectation or belief; any statements regarding HP’s long term plan
or future strategy; any statements relating to the plans,
strategies and objectives of management for future operations; any
statements concerning the expected development, performance, market
share or competitive performance relating to products or services;
any statements regarding current or future macroeconomic trends or
events and the impact of those trends and events on HP and its
financial performance; and any statements of assumptions underlying
any of the foregoing.
Risks, uncertainties and assumptions include factors relating to
the novel coronavirus (COVID-19) and its effect on U.S. and world
financial markets, general global economic conditions, and HP’s own
operations and personnel; HP’s ability to execute on its strategic
plan, including the recently announced initiatives, business model
changes and transformation; industry, market, economic, political,
regulatory and global health conditions; execution of planned
structural cost reductions and productivity initiatives; potential
developments involving Xerox Holdings Corporation; HP’s ability to
complete any contemplated share repurchases, other capital return
programs or other strategic transactions; the need to address the
many challenges facing HP’s businesses; the competitive pressures
faced by HP’s businesses; risks associated with executing HP’s
strategy, business model changes and transformation; successfully
innovating, developing and executing HP’s go-to-market strategy,
including online, omnichannel and contractual sales, in an evolving
distribution and reseller landscape; successfully competing and
maintaining the value proposition of HP’s products, including
supplies; the impact of macroeconomic and geopolitical trends and
events; the need to manage third-party suppliers, manage HP’s
global, multi-tier distribution network, limit potential misuse of
pricing programs by HP’s channel partners, adapt to new or changing
marketplaces and effectively deliver HP’s services; challenges to
HP’s ability to accurately forecast inventories, demand and
pricing, which may be due to HP’s multi-tiered channel, sales of
HP’s products to unauthorized resellers or unauthorized resale of
HP’s products; the protection of HP’s intellectual property assets,
including intellectual property licensed from third parties; risks
associated with HP’s international operations; the development and
transition of new products and services and the enhancement of
existing products and services to meet customer needs and respond
to emerging technological trends; the execution and performance of
contracts by HP and its suppliers, customers, clients and partners;
the hiring and retention of key employees; integration and other
risks associated with business combination and investment
transactions; the results of the restructuring plans, including
estimates and assumptions related to the cost (including any
possible disruption of HP’s business) and the anticipated benefits
of the restructuring plans; disruptions in operations from system
security risks, data protection breaches, cyberattacks, extreme
weather conditions, medical epidemics or pandemics such as the
novel coronavirus, and other natural or manmade disasters or
catastrophic events; the impact of changes in tax laws, including
uncertainties related to the interpretation and application of the
Tax Cuts and Jobs Act of 2017 on HP’s tax obligations and effective
tax rate; the resolution of pending investigations, claims and
disputes; and other risks that are described in HP’s Annual Report
on Form 10-K for the fiscal year ended October 31, 2019, and HP’s
other filings with the SEC.
Important InformationThis communication does
not constitute an offer to buy or solicitation of an offer to sell
any securities. In response to the exchange offer commenced by
Xerox, HP has filed a solicitation/recommendation statement on
Schedule 14D-9 with the SEC. HP SHAREHOLDERS ARE STRONGLY
ENCOURAGED TO READ HP’S SOLICITATION/RECOMMENDATION STATEMENT ON
SCHEDULE 14D-9 BECAUSE IT CONTAINS IMPORTANT INFORMATION.
Shareholders may obtain free copies of the
solicitation/recommendation statement on Schedule 14D-9, as well as
any other documents filed by HP with the SEC, without charge at the
SEC’s website at www.sec.gov. In addition, investors and security
holders will be able to obtain free copies of these documents from
HP by directing a request to Investor Relations, 1501 Page Mill
Road, Palo Alto, CA 94304, or by calling (650) 857-1501.
HP has filed a preliminary proxy statement with the SEC in
connection with the solicitation of proxies for the 2020 Annual
Meeting of Shareholders, and a definitive proxy statement and a
WHITE proxy card will be filed with the SEC and mailed to HP’s
shareholders. HP SHAREHOLDERS ARE URGED TO READ ANY PROXY STATEMENT
AND OTHER RELEVANT MATERIALS IF AND WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may
obtain free copies of these and other SEC filings made by HP (when
available) without charge from the sources indicated
above.
Certain Information Concerning ParticipantsHP
and certain of its directors and executive officers may be deemed
to be participants in the solicitation of proxies under the rules
of the SEC. Information regarding the names, affiliations and
interests of HP’s directors and executive officers is set forth in
the preliminary proxy statement for the 2020 Annual Meeting of
Shareholders and will be set forth in the definitive proxy
statement. Shareholders may obtain free copies of these documents
without charge from the sources indicated above.
About HP Inc. HP Inc. (NYSE: HPQ) creates
technology that makes life better for everyone, everywhere. Through
our product and service portfolio of personal systems, printers and
3D printing solutions, we engineer experiences that amaze. More
information about HP Inc. is available at www.hp.com.
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