UPDATED 17:59 EDT / MARCH 02 2020

APPS

Xerox launches hostile takeover attempt for HP

Xerox Corp. today officially launched its tender to acquire the much larger printer and personal computer maker HP Inc.

The company is offering to pay $24 per share, or $18.40 in cash and 0.149 Xerox shares for each HP share.

“Our proposal offers progress over entrenchment,” Xerox Chief Executive Officer John Visentin said in a statement. “HP shareholders will receive $27 billion in immediate, upfront cash while retaining significant, long-term upside through equity ownership in a combined company with greater free cash flow to invest in growth and return to shareholders.”

Xerox first made its interest in HP known in November when it offered to buy the company for $22 per share, only to see that bid shot down by HP’s board of directors. The board rejected the offer unanimously, saying it significantly undervalued HP and was not in its shareholder’s best interests.

Undeterred, Xerox persisted by sending a letter to HP’s board asking it to reconsider, or it would take the offer directly to the company’s shareholders. HP’s board was unmoved, and again rejected the deal.

Xerox still wasn’t having any of it, though. In January the company said it had secured $24 billion worth of binding financial commitments from Citi, Mizuho and Bank of America to support its proposed merger with HP. Visentin penned another letter, this time addressing HP’s shareholders directly, saying the financial commitment showed that Xerox has the necessary capital to fund its takeover plan.

HP rejected the offer again, saying the funding commitment is irrelevant because the buyout offer is still too low.

Xerox responded by increasing its offer to $24 per share and saying it would attempt to overthrow HP’s current board of directors at the company’s annual shareholder meeting this summer.

The company’s proposal has won support on Wall Street from the activist hedge fund manager Carl Icahn, who owns 11% stake in Xerox and almost 5% of HP. Icahn previously attempted and failed to block a bid by Dell Technologies Inc. to go private in 2013.

Tech analyst Rob Enderle of the Enderle Group told SiliconANGLE at the time that the “poison pill” strategy is a tried and tested strategy that has previously been used at other companies to thwart Icahn-led hostile takeovers.

“HP is a Silicon Valley treasure, part of the area’s garage startup heritage, and there are a lot of people that will go to incredible efforts to protect that legacy and prevent someone like Icahn from striking it down,” Enderle said.

HP’s current board of directors is steadfast behind the company’s leadership, which last month announced a three-year strategic plan, otherwise known as a poison pill, that’s meant to drive earnings growth and appease shareholders. The plan includes returning around $16 billion to shareholders by 2022. HP also sought to turn the negotiations on its head by saying it would instead consider buying Xerox itself.

HP, with a market value of about $27 billion, is about three times larger than Xerox.

Photo: Xerox/Facebook

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