HP Rejects Xerox's Raised Takeover Offer
March 05 2020 - 12:14PM
Dow Jones News
By Dave Sebastian
HP Inc. rejected Xerox Holdings Corp.'s $35 billion bid to take
over the maker of printers, printer supplies and personal
computers, again deeming the offer as too low.
HP on Thursday said a combination would disproportionately
benefit Xerox shareholders and that Xerox doesn't have the
operational experience in HP's sectors, such as personal systems,
home printing and 3D and digital manufacturing.
Xerox didn't immediately respond to a request for comment.
Xerox this week launched an effort to acquire all HP shares
outstanding, valuing HP at nearly $35 billion, or $24 a share in
cash and stock. It had raised the offer from $22 a share. HP said
the value of the offer's equity component poses a risk to the
company and would lead to uncertainties.
The offer would leave Xerox "burdened with an irresponsible
level of debt and which would subsequently require unrealistic,
unachievable synergies that would jeopardize the entire company,"
HP Chairman Chip Bergh said.
HP, based in Palo Alto, Calif., said Xerox's proposed
cost-cutting measures in the prospective combined company is
shortsighted and that its cost-saving estimates exceed reasonable
levels. It said Xerox's declining sales and its recent sale of its
interest in the Fuji Xerox joint venture raise concerns about the
company's future position.
HP also said it received inadequacy opinions from Goldman Sachs
& Co. and Guggenheim Securities this week.
HP President and Chief Executive Enrique Lores and Xerox Vice
Chairman and Chief Executive John Visentin have discussed
scheduling an in-person meeting next week to explore ways to revise
the deal terms, HP said in a securities filing Thursday. The two
men had spoken earlier this week, HP said.
In an interview with CNBC, Mr. Lores said his company remains
open to combining with Xerox.
"We need to agree on what are the right valuation of the two
companies, we need to make sure that the merged entity will have
the right capital structure and that the synergies are realistic,"
Mr. Lores said. "We really need to agree on the three terms before
we discuss what will be the best way of putting the two companies
together."
The two companies dominate different areas of the printer market
and have both been cutting costs as the need for printed documents
declines. Xerox, which is based in Norwalk, Conn., primarily makes
large printers and copy machines and generates revenue from renting
them to businesses and maintaining the devices. HP mainly sells
smaller printers and printing supplies, and it is also one of the
biggest PC makers in the world, though its printer business is more
lucrative.
A deal would combine those household names that have been trying
to reorient their businesses. Xerox has argued that a combination
could equip the companies to overcome those declines, potentially
yielding savings of more than $2 billion. The proposed deal has the
backing of activist investor Carl Icahn, who has stakes in both
companies.
HP, which had a market value of $30.96 billion as of Wednesday's
close, is significantly larger than Xerox, whose market
capitalization was about $7.17 billion.
HP last week said it would buy back $15 billion of its stock as
it worked to block Xerox from taking over. Xerox has said it plans
to nominate 11 independent candidates to replace HP's board at the
HP's annual shareholder meeting this summer.
Xerox shares were down more than 4% late Thursday morning, while
HP shares were about flat.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
March 05, 2020 11:59 ET (16:59 GMT)
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