Sergey Nivens - Fotolia
HP Inc for a few dollars more
Xerox has increased its offer price for HP Inc from $22 to $24 per share, to acquire its rival for $36bn
Xerox is continuing its pursuit to acquire rival printer manufacturer HP Inc by targeting HP shareholders with an offer $2bn higher than its previous bid.
Xerox said it has met multiple times with some of HP’s largest stockholders. “These stockholders consistently state that they want the enhanced returns, improved growth prospects and best-in-class human capital that will result from a combination of Xerox and HP. The tender offer announced today will enable these stockholders to accept Xerox’s compelling offer despite HP’s consistent refusal to pursue the opportunity,” the company claimed.
Xerox has consistently maintained that the acquisition would create shareholder value for HP Inc investors. It has suggested that synergies realised in a combination of Xerox and HP go beyond what HP can achieve on its own by revising its strategic plan or dramatically changing its capital allocation policy to incorporate additional share repurchases.
“Xerox’s offer provides HP stockholders with both significant, immediate cash value, and meaningful upside via equity ownership in the combined company. The headline offer price of $24.00 per share represents a 41% premium to HP’s unaffected 30-day volume weighted average trading price of $17.00. The implied offer value of ~$33 per share represents a 94% premium to HP’s unaffected 30-day volume weighted average trading price of $17.00,” Xerox said.
As Computer Weekly has previously reported, Xerox hopes it can achieve savings of 30% by removing duplicate operations and 30% by cutting duplicate delivery options. IT spending could also be reduced from 2% of revenue to 1.5% of revenue. According to Xerox, the acquisition would generate nearly 60% more equity value than HP’s standalone plan would for its shareholders.
This offer represents Xerox’s latest bid to entice HP Inc shareholders. In January, the company unveiled plans to put forward “a full slate of directors” for election at HP’s 2020 annual meeting in April. Those to be nominated include former senior executives from several blue chip companies, including Aetna, United Airlines, Hilton Hotels, Novartis, Verizon and more.
Xerox said the candidates were chosen because of their expertise in overseeing and executing significant company transformations and combinations, with demonstrated track records of creating value for shareholders.
Read more about Xerox and HP Inc
- Xerox plans to pay HP Inc shareholders $17 per share in cash and nominate a new HP Inc board, specialising in business transformation.
- Xerox wants to oust the HP Inc board, replacing it with directors who will push through its proposed acquisition.
- Xerox believes it now has what it takes to push the deal through, but one of its main investors has been accused of insider dealing.
- HP Inc’s board of directors have formally declined Xerox’s $30bn acquisition offer, but it has left the door open for merger negotiations.
- Letters have been flying between the HP Inc board of directors and Xerox, with Xerox planning to pitch directly to shareholders.
At the time, HP Inc attacked Xerox’s move to initiate a hostile takeover bid, which involves replacing the existing board with 11 new members, claiming that Xerox’s tactics were self-serving.
“The HP board of directors is committed to serving the best interests of all HP shareholders and to pursuing the most value-creating path. Value creation for HP shareholders is not dependent on a Xerox combination,” it said.
“There are numerous opportunities available to HP to drive sustainable long-term value. These include the execution of HP’s strategic plan, and the deployment of its strong balance sheet for increased share repurchases of its significantly undervalued stock, and for value-creating mergers and acquisitions. Xerox’s proposed transaction attempts to use HP’s financial capacities for the benefit of Xerox shareholders.”
