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November 26, 2019

Xerox Goes Hostile on HP, Vows to Take Bid Directly to Shareholders

Xerox hits out at HP's "modest, expensive and time-consuming cost savings"

By CBR Staff Writer

Ding, ding, seconds out.

A highly public spat between HP and Xerox ratcheted up a notch today, with Xerox saying HP’s refusal to engage in mutual due diligence with Xerox “defies logic” — and that it would take its $33.5 billion takeover bid directly to HP’s shareholders.

“We plan to engage directly with HP shareholders to solicit their support in urging the HP Board to do the right thing and pursue this compelling opportunity” Xerox Holdings Corp.’s CEO John Visentin wrote, hitting back at HP — a day after the latter’s board shared a strident rejection of Xerox’s $22/share offer.

HP Had Raised Concerns About Xerox’s Health 

In yesterday’s letter to Xerox, HP president and CEO Enrique Lores claimed there are “significant concerns about both the near-term health and long-term viability of your business.”

The proposal “significantly undervalues HP” he added.

“In particular, there continues to be uncertainty regarding Xerox’s ability to raise the cash portion of the proposed consideration and concerns regarding the prudence of the resulting outsized debt burden on the value of the combined company’s stock even if the financing were obtained,” HP’

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Read HP’s Blistering New Rejection of Xerox’s $33.5 “Hostile” Offer

Xerox’s Visentin was equally caustic today, deriding HP’s own restructuring plan and saying: “Rather than engage with us in three weeks of customary mutual due diligence, HP continues to obfuscate and make misleading statements.”

He added: It is important that we correct, for your benefit and that of HP’s shareholders, a few of the mischaracterizations from your last letter:

Xerox Goes Hostile 

n.b. edited by Computer Business Review for brevity:

  • “On February 5, 2019, Xerox announced a three-year strategic plan. We are already outperforming this plan… which is why our stock is up 96% year-to-date.
  • “It is possible that the modest, expensive and time-consuming cost savings included in the restructuring plan you announced on October 3, 2019 (only $1 billion over three years at a cost of $1 billion in restructuring charges), has resulted in a lack of confidence in HP’s ability to realize the $2+ billion of synergies your team previously agreed could be achieved in a combination.
  • “We monetized our illiquid interest in Fuji Xerox at over 20 times 2019 expected aggregate cash flow while favorably restructuring the terms of our sourcing relationship with Fuji Xerox to ensure continuity of supply, protect our high-value intellectual property and provide strategic flexibility. There is no “hole in Xerox’s portfolio” as a result of those transactions – just significantly more cash to support growth and greater flexibility in our sourcing terms.

He added: “While you may not appreciate our “aggressive” tactics, we will not apologize for them. The most efficient way to prove out the scope of this opportunity with certainty is through mutual due diligence, which you continue to refuse, and we are obligated to require.” The offer will now be put directly to HP’s shareholders.

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