HP unanimously rejects Xerox proposal

On 16 November, HP turned down Xerox's offer to buy the business for US$33.5 billion, noting concerns about Xerox’s declining revenue and future business direction. The unsolicited offer was made by Xerox on 5 November, whereby Xerox chairman and CEO John Visentin wrote to HP chairman Chip Bergh, outlining a proposal to combine the two companies.

Xerox offered to pay HP shareholders US $22 per share comprised of $US 17 in cash and 0.137 Xerox shares for each HP share.

A letter signed by Bergh and HP chief executive Enrique Lores confirms that at a meeting with HP financial and legal advisors, it was unanimously concluded that the offer “significantly undervalues HP and is not in the best interests of HP shareholders. In reaching this determination, the Board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock.”

The letter went on to say: “We have great confidence in our strategy and our ability to execute to continue driving sustainable long-term value at HP. In addition, the Board and management team continue to take actions to enhance shareholder value including the deployment of our strong balance sheet for increased repurchases of our significantly undervalued stock and for value-creating M&A. 

“We recognise the potential benefits of consolidation, and we are open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox. However, as we have previously shared in connection with our prior requests for diligence, we have fundamental questions that need to be addressed in our diligence of Xerox. We note the decline of Xerox’s revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects. In addition, we believe it is critical to engage in a rigorous analysis of the achievable synergies from a potential combination. 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.

“We remain ready to engage with you to better understand your business and any value to be created from a combination.”

Full text of the letter that was received from Xerox on 5 November can be found on:

https://press.ext.hp.com/us/en/press-releases/2019/hp-board-of-directors-unanimously-rejects-unsolicited-xerox-proposal.html