Xerox, HP Stocks Gain Amid Deal Talk -- WSJ
November 07 2019 - 3:02AM
Dow Jones News
By Patrick Thomas and Cara Lombardo
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 7, 2019).
Shares of Xerox Holdings Corp. and HP Inc. rose after The Wall
Street Journal reported on a possible tie-up of the legacy
technology companies.
Xerox has made a cash-and-stock offer for the maker of personal
computers and printers, people familiar with the matter said
Wednesday. The Wall Street Journal reported late Tuesday that a bid
might be forthcoming.
HP said late Wednesday that it has held discussions with Xerox
in the past about combining the businesses, and received a proposal
for such a combination on Tuesday.
"We have a record of taking action if there is a better path
forward and will continue to act with deliberation, discipline and
an eye towards what is in the best interest of all our
shareholders," HP said.
Shares in HP rose 6.4% on Wednesday, while Xerox shares rose
3.6%, in a sign that shareholders of both companies might approve
of a union.
HP, which had a market value of about $29 billion as of
Wednesday's close, is significantly larger than Xerox, whose market
capitalization was about $8 billion. The bid includes a takeover
premium and is less than $23 a share, the people familiar with the
matter said. HP stock closed Tuesday at $18.40.
A deal would join two household names with storied pasts that
have been trying to retool their businesses as the need for printed
documents declines. Both companies are in cost-cutting mode and a
union could afford new opportunities to shed expenses -- to the
tune of more than $2 billion, according to people familiar with the
matter.
JPMorgan Chase & Co. analyst Paul Coster said in a research
note that the deal looks feasible and has merit, adding that Xerox
Chief Executive John Visentin is well-equipped to cut costs and
restructure a combined company. Mr. Coster said a merged entity
could innovate faster.
The drawbacks, however, would be the size and complexity of a
deal, he said. "The combined company will still be confronted with
the challenge of mid-single-digit secular decline in printing
industry revenues," Mr. Coster said. "Execution of cost synergies
could take 2-3 years to realize, and there are risks associated
with the undertaking."
Billionaire investor Carl Icahn, who owns a 10.6% stake in Xerox
and along with a partner controls its board, would likely play a
big role in the outcome. "The question now is whether Icahn (or
someone else) is also on the other side and in a position to put
pressure on [HP's] new CEO, Enrique Lores," Gordon Haskett analyst
Don Bilson said in a research note. Mr. Bilson also said that
should HP not be receptive, the window for a shareholder to launch
a proxy fight for board seats opens on Christmas.
Should Xerox acquire HP, it could be the second recent example
of Mr. Icahn orchestrating a deal in which the buyer is smaller
than the seller. Eldorado Resorts Inc. in June agreed to acquire
Icahn-backed Caesars Entertainment Corp., which is twice its size,
for roughly $9 billion.
Write to Patrick Thomas at Patrick.Thomas@wsj.com and Cara
Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
November 07, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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