HP has unceremoniously batted back Xerox’s latest offer – saying the proposal claims “unrealistic, unachievable synergies that would jeopardize the entire company.”
The unanimous rejection by the HP board comes four days after Xerox offered HP shareholders $24.00 per share. ($18.40 in cash and 0.149 Xerox shares).
Xerox first proposed an audacious takeover of the much larger HP in November, turning hostile after HP’s board rejected its overtures in a public war of words.
A merger would saddle the combined company with onerous debt, HP’s board added, saying “synergy” estimates, including cost cuts, “exceed reasonably achievable levels.”
HP has already vowed to lay off 9,000 staff as part of a restructuring that it hopes will turn around its own struggling business. Strong quarterly earnings last week bolstered that cause and its bid to fight off the hostile overtures from rival Xerox.
(On Monday February 25, HP beat analyst expectations for its fiscal first quarter and announced a plan to return $16 billion to shareholders in the next three years).
“Our message to HP shareholders is clear: the Xerox offer undervalues HP and disproportionately benefits Xerox shareholders at the expense of HP shareholders,” said Chip Bergh, Chair of HP’s Board of Directors today.
He added: “The Xerox offer would leave our shareholders with an investment in a combined company that is burdened with an irresponsible level of debt.”
Xerox said Monday MUFG, PNC, Credit Agricole, Truist and Sun Trust Robinson Humphrey and joined Citi, Mizuho and Bank of America to commit $24 billion in binding financing commitments (not subject to any due diligence conditions).
But HP said today it had received an “inadequacy opinion” from Goldman Sachs and Guggenheim Securitie saying “in their respective written opinions, the consideration proposed to be paid to the holders… was inadequate from a financial point of view.”
“At HP, we’re creating value, not risk,” said Enrique Lores, HP’s President and CEO. He added: “HP is a trusted brand with a strong track record of value creation and we’re executing a clear plan that will drive significant earnings growth.
“We’re well positioned in our categories, aggressively attacking costs and pursuing the most value creating path for our shareholders.”
Like HP, Xerox is struggling with declining print revenue and midway through an aggressive restructuring that includes plans to trim the number of applications it is running from 1,700 to 500, and cut its 8,000 suppliers to 3,000. Xerox said it had achieved gross savings of $640 million under its “Project Own It” shakeup.
Xerox’s aggressive attempt to buy the much larger HP while simultaneously running a full slate of director nominees for election at HP’s 2020 AGM “evidences Xerox’s desperation to acquire HP to address its continued business decline” HP claimed.