Xerox Holdings Corp. announced today that it will nominate 11 new directors to HP Inc.’s board in a bid to push through its proposed acquisition of the personal computer and printer maker.

Xerox submitted an unsolicited $33.5 billion takeover bid for the company last November that was rejected almost immediately after it was sent.

HP’s board argued that the offer, which breaks down to about $22 per share, significantly undervalues the company. Xerox fired back by pledging to take the proposal to HP shareholders if an agreement is not reached between the companies’ leadership.

The director nominations announced today officially kick off the proxy fight. Xerox plans to bring the 11 nominations for a vote at HP’s annual shareholder meeting this summer, which will amount to asking investors to replace the company’s entire board. The HP board currently has 12 directors and that number will go down to 11 when former Chief Executive Officer Dion Weisler vacates his seat later this year.

Xerox’s nominees include former executives from United Airlines Inc., Verizon Communications Inc., Novartis International AG and the Export-Import Bank of the United States. The candidates will need to be approved by shareholders with a combined stake of over 50% in HP to enter the board. Xerox has already received the public backing of activist investor Carl Icahn, who owns about 11% of HP, and hinted today that other shareholders are warming up to the idea of a merger as well.

“HP shareholders have told us they believe our acquisition proposal will bring tremendous value, which is why we lined up $24 billion in binding financing commitments and a slate of highly qualified director candidates,” Xerox CEO John Visentin said in a statement today. Xerox, which generates about a sixth of the revenue HP does, recently said it had secured $24 billion worth of loans from a bank consortium to finance the acquisition.

HP issued a statement pushing back against the proposed board shakeup. “These nominations are a self-serving tactic by Xerox to advance its proposal, which significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders,” a spokesperson said. “We believe that Xerox’s proposal and nominations are being driven by Carl Icahn, and his large ownership position in Xerox means that his interests are not aligned with those of other HP shareholders. Due to Mr. Icahn’s ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP.”

Xerox’ pitch to HP shareholders is that a merger would enable the companies to cut annual expenses by $2 billion within two years through moves such as consolidating their information technology departments. Furthermore, the printer and copier maker claims it would be possible to boost revenues by $1 billion to $1.5 billion over a three-year period. 

Unnamed insiders told Bloomberg that Xerox is weighing to follow up the director nominations with a tender offer to purchase HP shares directly from shareholders. According to the sources, there’s a possibility the company will raise its $33.5 billion bid to win over investors.

Xerox’ hostile takeover attempt is driven in no small part by the growing challenges of the printer market. Xerox saw revenues drop nearly 10% in 2019 as a result of sluggish demand, a fall that it argues would be easier to reverse if it were to band together with HP. The company previously tried to merge with Japan’s Fujifilm Holdings Corp., but the deal was scrapped due to pressure from investors including Carl Icahn, one of the highest-profile backers of the HP bid.

Photo: Xerox