Xerox Holdings Corp. is determined to see its $33.5 billion buyout bid for HP Inc. succeed.

After receiving a formal rejection over the weekend, the copier and printer maker today sent a letter to the HP board pledging to take the offer to HP shareholders if a deal is not reached by Monday afternoon. The proxy fight that may ensue could very well end with Xerox clinching the buyout. 

The company, whose annual revenue is about a sixth of HP’s, wants a merger to create a bigger organization with more resources to deploy against the headwinds in the stagnating printer market. Sources who spoke with the Wall Street Journal this month said that Xerox and HP could realize more than $2 billion in annual cost savings by joining forces. The latter company has separately launched a restructuring initiative meant to shave $1 billion off its yearly expenses.

The prospect of lower operating costs is not the only potential reason HP shareholders may have to back the buyout offer in a future proxy fight. Xerox’s $33.5 billion bid breaks down to $22 per HP share, above the $20 median price target of 15 analysts surveyed by Reuters. It’s also considerably higher than the $14 price target of Goldman Sachs Group Inc., which serves as HP’s financial adviser. 

“Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders” if a deal doesn’t happen by 5 p.m. EST Monday, Xerox Chief Executive Officer John Visentinin wrote in the letter to HP’s board. “We were very surprised that HP’s Board of Directors summarily rejected our compelling proposal,” he also wrote.

HP’s board, meanwhile, said this weekend after rejecting the buyout bid that the offer “significantly undervalues HP and is not in the best interests of HP shareholders.” But the company left open the possibility of negotiations by stating that “with substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction.”  

HP is already facing some investor pressure to accept a merger. Activist hedge fund manager Carl Icahn, who owns 4.23% of the company’s stock and a 10.4% stake in Xerox, publicly called for a merger in a recent interview. 

Photo: Xerox